As I delve far deeper statistically into the DXY and EUR/USD relationship, I bring dire dire warnings and ask sincerely for every market trader to heed this advice. The DXY and EUR/USD relationship at present price junctures cannot sustain itself much longer. This marriage must and will burst wide open. The operative word is burst, not trend. Prices are beyond the point of trend, next comes explosion.
For perspective, the 2008 crash didn’t experience numbers to this depth, degree and magnitude. Once the market catalyst hits, look out. EUR/USD is in decent shape because its allowed to range wide by design and price construction particularly against DXY. EUR/USD ranges are allowed to roam about 2 times DXY ranges. Yet that means upon a catalyst, EUR/USD will be hit the hardest. DXY and USD pairs are dangerously strangled and represents severe problems yet the stranglehold in turn is restricting EUR/USD ranges.
DXY problems are the direct result of Yellen and all her hocus pocus economics. Dot Plots in FED Funds 5 year averages is not remotely close to serious. By offering the new 2015 Fed Facility in Repurchase Agreements, the USD system of interest rates was choked and gasps for breath because it locked FED Funds, Eurodeposits, Commercial Paper and every USD interest rate from Fed Funds to Yields in the tightest ranges. Done not only to hold FED Funds in small ranges but allowed Yellen to re invest Treasury proceeds. This in turn limited DXY and all USD pairs. All comotose Fed sees are those outdated and structurally ineffective DSGE equilibrium models. I’m not calling for a crash but I’m saying the big giant move is ahead unless Yellen wakes up and corrects the severe structural price imbalances.
Thank you to my long time commodity trader friend. Implosion or explosion. We could fly either way because DXY and EUR/USD are deeply married with limited variation between both. That’s exactly what happened at crisis times. A EUR/USD to fly higher is a problem for Draghi as much as a higher DXY for Yellen. Yet both can’t travel together.
For interested, I’m writing and publishing my deep analysis in the popular press.
EUR/USD. Bottom. 1.1358. This is a problem for today. EUR/USD is mis priced. Look at Bottoms at 1.1330, 1.1315 and 1.1302.
Upper targets, 1.1375, 1.1400 and 1.1426. Look for the failure and reverse at 1.1375 to 1.1400.
Big points above, 1.1507, 1.1552 ( Monthly Average), 1.1507, 1.1504, 1.1431, 1.1414, 1.1379, 1.1360 to 1.1365, don’t touch prices here.
Below points, 1.1278, 1.1247, 1.1236, 1.1186, 1.1155, and big break 1.1118.
Brian Twomey, Inside the Currency Market, btwomey.com