Current DXY price for December trades above its 1 and 2 year monthly averages while EUR/USD trades well below its correspondent means. Written in last month’s post was DXY was on the verge of a massive breakout higher to last years in the future. Trump’s election provided the impetus to take EUR/USD to 1.0518 lows and DXY to 102.15 highs.
DXY from current 100.75 trades well above its 1 and 2 year monthly averages at 96.93 and 96.54. November averages rose 37 and 18 pips from 96.56 and 96.36. DXY’s average December range is located from 289 to 307 pips and equates to 15.3 pips per day inside a 20 day trading month. Range factors to 103.82 highs to 97.68 lows. DXY’s range translates to EUR/USD 1.0888 highs to 1.0438 lows.
DXY’s top channel point is located at 103.20 yet from current 100.75 headwinds exist from 101.93, 101.72, 101.52, 101.25, 101.17 and 101.02. DXY must break 101.93 for 103.20 consideration. First two vital points above are found at 100.79 and 100.91.
Bottom points are located at 100.65 and 100.25 then 99.71, 99.64, 99.41, 99.34 and 99.29. Overall range to factor to the averages is located from 99.71 to 101.93 for a 222 pip range. Any drops in DXY is a correction inside a larger and lasting uptrend.
EUR/USD 1 and 2 year monthly averages are located at 1.1093 and 1.1155. Average range is located from 212 to 225 or 11.25 pips per day and factors to 1.0888 highs to 1.0438 lows.
From current 1.0663, next above for EUR/USD begins at 1.0763, 1.0798, 1.0807, 1.0825, 1.0859, 1.0878, 1.0933 then 1.1023 and 1.1057.
Below supports begin at 1.0661, 1.0664, 1.0618, 1.0587, 1.0578 then on to 1.0479, 1.0405, 1.0319 and 1.0303. Bottom channel is located at 1.0100’s and 0.9800. EUR/USD was introduced in 1999 at 0.8600 and skyrocked to 1.57 highs in 2006/2007. Over time, EUR/USD has every ability to travel back to parity as the trend lines continue to drop every month. Any price rises are corrections inside a continued downtrend.
From a daily perspective, vital break points are 1.0852 and 1.0705. EUR/USD must break 1.0852 to travel higher on a further break of 1.0705.
EUR/USD’s larger view is the struggle between overbought vs oversold in the daily price distribution. This fight is seen for example in overbought 5 and 10 day averages V severely oversold 200 and 253 day averages.
Overall, EUR/USD price is severely low and on the floor yet no reason exists for EUR/USD to break higher as the FED threatens to raise Fed Funds. Should Yellen not raise in December as expected, EUR/USD has every ability to skyrocket higher. Best strategy is sell the 1.0700 highs and long on the 1.0500 to 1.0400 lows.
Brian Twomey, Inside the Currency Market, btwomey.com