The 1.0500 and 105.00 DXY line remains most vital. The 1.0500 line began from the 2008 market crash at 1.1185. From spot checks every January since 2008, the 1.1185 line drifted 600 pips lower to a very low degree of separation between EUR/USD and DXY. The current 1.0500 line held at 1.0700’s in 2011 then 1.0500 first appeared in 2012.
Year 2014 was an outlier as the EUR/USD Vs DXY separation achieved 1.0800 due to the ECB adoption of negative interest rates. Year 2015 rightsized the EUR/USD and DXY relationship back to 1.0500’s.
Since 2012 to exclude 2014, the EUR/USD V DXY relationship held constant at 1.0500’s except for years 2016 and 2017 when the degree of separation traded at 1.0300’s. After 2017, EUR/USD V DXY reverted to 1.0500’s yet again.
The context to 1.0500 refers to very low 1.0600’s such as 2013 at 1.0618 and 1.0610 in 2021 to 1.0496 in 2012 and 1.0447 in 2020. Remainder years held 1.0500’s as a constant such as 2015 at 1.0529, year 2018 at 1.0591 and year 2019 at 1.0509.
Since 2008, the EUR/USD Vs DXY relationship traded a strategy to meet at center stage and to obliterate the high and wide degree lines of separation.
BRIAN TWOMEY ON TRADING 