Last month was reported EUR/USD location should be at 1.1300 – 1.1400 and was perfectly comfortable. EUR/USD achieved the levels and is perfectly comfortable in its current range. However the EUR/USD topside is now dropping and light years of downside exist below but big downsides will take more time.To understand the downside for the week and month, extremes in EUR/USD are found at 1.1558 and 1.0477. For now, Monthly averages 1,3,7 and 10 are in range however the 10 year range top is found at 1.1317. The longer EUR/USD ranges, the more the downside is favored. Don’t lose sight Draghi cut again, a cut not yet seen in the markets and may not be seen for another month or maybe two as the ECB is the slowest central bank to normalize after rate rises and falls.
Topside points 1.1281, 1.1290, 1.1302, 1.1317, 1.1373. Further 1.1406, 1.1457, 1.1470. Downside points and outside range bounds 1.1290,1.1104, 1.1092 and 1.0477. Downside must break, 1.1203, 1.1092 and 1.0897. The 10 year average topside is 1.0897 and bounded by bottom at 1.0477 and top at 1.1317. The 10 year average against current points and ranges reveals the commentary for EUR/USD downside. The 2 and 5 year monthly averages are out of range at 1.1406 and 1.1586. At 1.1586 leaves the 3 year average out of bounds at 1.1500. Direction is down, rallies should be sold and target much lower over time.
DXY. From current 95.07, topside at 97.00’s is out of bounds from averages 1, 2, 3, 5 and 7 year while 94.00’s are out of bounds at the 1, 2 and 3 year but hold supports at the 5 and 7 year averages. As DXY ranges, topside is favored. Correlations to EUR/USD are 98%, means EUR/USD and DXY are at 1 for 1 pips. 1 pip drop in EUR/USD is 1 pip rise in DXY.
Topside points and out of bounds, 97.78, 97.11, 97.08, 96.99, 96.64. Bottoms and out of bounds 94.53, 94.45, 94.38, 93.40. Supports 94.84, 94.15. Vital points 96.12, 95.89, 95.81, 95.69.
Strategy. Buy DXY drops and sell EUR/USD rallies. DXY is going far higher over time. Eventual target is 102.00’s and 1.0600’s to 1.0500’s for EUR/USD. DXY line is now at 144 and a 22 point drop in the last 3 months. Says we’ve seen little to no action in prices overall. We’ll continue to follow this situation daily.
Brian Twomey, Inside the Currency Market, btwomey.com