The 2008 market crash as I stated a million times was not a crash. From the 2015 EUR/JPY study, Regression Statistics for 2007 clearly reveal EUR/USD and EUR/JPY traded to the massive tops and was on its way to a massive fall while USD/JPY was on its way to a massive rise. Not 1 pip for EUR/USD and EUR/PY longs existed as both traded to extreme tops while USD/JPY traded to extreme bottoms. USD/JPY at extreme bottoms is the same as saying DXY traded to extreme bottoms.
Second, note the EUR/USD and DXY relationship at 2005, 2006 and 2007. Year 2005 peaked at 1.0769, dropped to 1.0419 in 2006 and rose again in 2007 to 1.0779. Every time EUR/USD Vs DXY achieved a relationship at 1.0700, a giant drop happened the next year. Year 2014 saw 1.0800’s then dropped to 1.0529 for 2015.
The EUR/USD Vs DXY relationship appears to top at high 1.0600’s and 1.0700’s every time since 1999 then drops. The 2007 reading at 1.0700’s was possibly an early warning to a giant move in preparation. If Housing wasn’t reported as a travesty, years 2008 and 2009 would’ve traded as an orderly market.
For Housing, vew Jimmy Carter’s 1978 Community Reinvestment Act and compare it to Clinton 1995 Community Reinvestment Act. Clinton relaxed lending standards for House purchases so anyone with a paycheck and job a Mc Donalds could own a house. The loans for house purchases were worthless and nobody backed the loans. The result was a house crash to prices. The house crash was already ordered to happen as loans became more and more worthless.
Inside the EUR/USD V DXY numbers is the price positions. The true position of EUR/USD Vs DXY is EUR/USD as a higher exchange rate than DXY. This is the case for all European instruments Vs the United states and USD. DAX contains a higher price than Nasdaq, Brent oil has a higher price than WTI. Most importantly, Ester at 3.14 trades below Fed Funds at 5.08.
The natural historic positions of EUR/USD V DXY is EUR/USD trades at a 1.0000 while DXY trades 0 point. A factor inside the numbers is also the amount of times EUR/USD Vs DXY crossed over each other and switched positions. Since 2008, the switch happened 1 time in June 2022 at EUR/USD and DXY at 1.0500’s. The result was 1000 pip move as EUR/USD traded to 0.9500’s and DXY to 114.00’s.
Years 1999 to 2000 was also years of crossovers as EUR/USD crossed below DXY. Year 1999 began at 1.0557 in the EUR/USD V DXY relationship and dropped to 1.0176 in year 2000.
Overall since 1999, the comfortable and trade range for EUR/USD V DXY sits at 1.0700’s to high 1.0400’s to 1.0300 and 1.0500’s represents the middle position. Current 1.0500’s is viewed as DXY assuming the historic 0 point role and EUR/USD remains a 1 point currency.
The Historic Numbers
Years 2008 ad 2009 were recorded for January and December to observe the total effects to EUR/USD V DXY as 2008 and 2009 were outlier trade years.
1999 = 1.0557
2000 = 1.0176
2001 = 1.0201
2002 = 1.0406
2003 = 1.0278
2004 = 1.0609
2005 = 1.0769
2006 = 1.0419
2007 = 1.0779
2008 January = 1.1144
2008 December = 1.0654
2009 January 1.1007
2009 December = 1.1219
2010 = 1.1043
2011 = 1.0701
2012 = 1.0498
2013 = 1.0618
2014 = 1.0800
2015 = 1.0529
2016 = 1.0363
2017 = 1.0347
2018 = 1.0591
2019 = 1.0509
2020 = 1.0447
2021 = 1.0610
2022 = 1.0445
2023 = 1.0620
Brian Twomey
BRIAN TWOMEY ON TRADING 