EUR/USD V DXY: 40 and 50 Year Averages, Pt 2

DXY monthly averages from 1 year to 50 line up as follows:
1 Year 99.67
5Y = 95.69
10Y =92.83,
15Y =88.16
20Y = 88.41
25= 92.02
30Y = 91.64
35Y = 91.62
40Y = 95.75
45Y = 95.81
50Y = 96.43

Averages from 1 year to 39 trade stratospheric overbought while averages from 40 to 50 drive current DXY. The top from 110.72 to 111.55 normalizes the DXY price from 40 and 50 year averages. Above 110.72 and 111.55 begins overbought from 40 and 50 year averages.

Overbought means count another 100 pips and every 100 pips from 111.55. Above 111.55 for example then trades 112.18, 112.20, 112.24, 112.29 and 112.36. Then next comes 113.00’s and 114.00’s.

Can DXY reach such lofty levels on overbought 40 and 50 year averages and send lower averages to more massive overbought. DXY began this upward journey upon the 2008 crash at around 75.00 or 3400 pips in 14 years and roughly 250 pips per year.

Quite an extraordinary circumstance but not unusual to trade 40 and 50 year averages. Roughly 10 years ago CHF/JPY traded 150.00 and 160.00’s and overbought at 50 year averages. Years later, CHF/JPY traded to 100.00’s.

DXY is on the same path as CHF/JPY to trade years and years of lower prices. The immediate trade is short USD/JPY, long EUR/USD and short JPY cross pairs. USD/JPY is most representative of DXY as the same exact pair while USD/CAD and USD/CHF trade in their own universe. The only currency to analyze against DXY is USD/JPY.

Historically from 50 years and BOE creation in 1694, markets trade in the 2nd of 4 quadrants marked by 12 1/2 year periods. The current 2nd period runs from 2018.5 to 2031 which is a crash phase historically as every market crash or new market trade arrangement developed in the 2nd quadrant since 1694. Previous Gold and Silver standards, depression and recessions and new interest rate arrangements highlight 2nd periods.

The crash of 2008 is viewed as not crash but the craziest news announcement on record as EUR/USD reached its maximum peak and USD/JPY bottomed.

DXY at 40 and 50 year averages is extraordinary but not unusual to markets especially in 2nd periods.

Brian Twomey

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