EUR/USD vs DXY: Historic day upon us

Brian Twomey Brian's Investment

EUR/USD and DXY as the two most important currency pairs in currency and all markets. Here's present exchange rates EUR/USD 1.0406 Vs DXY 104.64. As like decimals, 1.0406 Vs 1.0464. This development is historic and may never be seen again in our lifetimes. EUR/USD crossed below DXY. Explains why EUR/USD went beserk yesterday.

Since 1999 and EUR introduction and from monthly averages, I don't see another instance when EUR/USD traded below DXY. DXY above 100 occurred last for 3 months in 2017, once in 2016 and 2015. Then from 1999 to 2002.

In 276 months since 1999, DXY traded above 100 in 45 months. DXY achieved its highest high January 2002 at 120.59 and lows at 72.00's. DXY 3 big lines exist at 103.71, 100.79 and 96.00's.

Targets for DXY if complete, occurs at 105.60, and 107.06. Both are at extremes. If ever DXY and EUR/USD crossed then the only time is from 1999 to 2002. DXY at 105 and 107 takes EUR/USD to near parity and close to its 0.9900 introduction, although 0.9900's was a fleeting instance as EUR/USD skyrocketed to 1.0300's and 1.0700's within 2 months.

To 1999 prices was the beginning of DXY and 1996 online currency trading, I believe FXCM was the first yet market sizes to trading was small and prices varied far far and wide then. The internet replaced the Teletype price feed from New York as the centralized repository to prices. My estimation the feed from New York remains today to plug and align prices into various platforms.

EUR/USD's proper place is trade above DXY. Prior to EUR/USD as USD/DEM or the German Deutschemark. EUR/USD at 1.0400's translates as USD/DEM today at 1.8500's and above DXY. Far and wide price trading was the result of EUR/USD transferred to DEM and DXY introduction. A truly new day existed since 1999.

While 96.00's represents DXY's historic levels, EUR/USD's 23 year historic line is located 1.2112. Both DXY and EUR/USD not only achieved furthest distance but DXY is massively overbought and aligns to massive oversold EUR/USD.

In the Bloomberg Survey of 400 participants, 250 or slightly more than 1/2 forecast EUR/USD at parity. A vast majority forecast 1.1500's from parity. My forecast to 1.1300's holds and just below the 5 year average at 1.1500's. Note my forecast to 400 ish money managers.

What money managers and my forecast are imparting is the trade of the decade is upon us.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

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