Hello

I would like to share a view on the EURUSD and DXY, items that typically move in opposition. In the last few weeks things have been shaping up so that this pair may be at a turning point. EURUSD for the upside, DXY to the downside. Here’s my rationale on why.

For the EURUSD, I have 3 scenarios:

1- DEFAULT model : Hurst nominal cycle lengths

2- MY EURUSD pinned 18m trough NOV2018 model : Historical best fit cycle lengths since 1980, with one 18m trough pinned in NOV2018

3- MY EURUSD pinned 18m trough NOV2018 model AND pinned 9yr peak FEB2018 : Historical best fit cycle lengths with pinned 9yr peak in FEB2018

Graphs here:

Comments EURUSD:

1- The DEFAULT peak model places the last 18m trough in NOV2018. It also places an 18m peak on FEB2018, and expects the 54m peak in about SEP2019. The CML is bullish till SEP2019, but after that it is very bearish for a very long time. This is because this DEFAULT model assumes a 54m trough in JAN2017. This makes a BIG difference.

2- MY EURUSD model (which has different cycle lengths from the DEFAULT model) also has the last 18m trough in NOV2018. It assumes JAN2017 as a more significant 18yr trough. The peak model also thinks that FEB2018 was an 18m peak, and that the 54m peak is still to come in SEP2019. The big difference to the DEFAULT model is the CML estimate, which is bullish till the 54m peak in SEP2019, then retraces somewhat to mid-2020, and then continues powering on up.

3- This third model is a pessimistic view, but a possible one. A 9yr peak in FEB2018, makes the CML estimate be bullish till the next 18m peak in about JUN2019. After that it projects a move down to the next 18m trough in mid-2020. Only after this trough is the CML bullish in similar fashion to the second model.

DeMark comments:

i. Monthly: About to make a 9TD BUY sequence (bullish)

ii. Weekly: Completed a 13TD BUY and is currently in step 9 of another 13TD BUY(somewhat bullish)

iii. Daily: Completed two sequential 13TD BUY setups (bullish)

For the DXY I have 2 scenarios:

1- DEFAULT model : Hurst nominal cycle lengths

2- MY DXY model pinned 18m peak MAR2018 : Historical best fit cycle lengths since 1979 with the last 18m peak pinned to MAR2018

Graphs here:

Comments on DXY:

1- DEFAULT model expects FEB2018 to have been a 9yr trough. CML projects a move down to a 20wk trough in MAR2019. Then choppiness till the 18m trough in SEP2019. Following it is bullish till the 54m peak in end 2020.

2- MY DXY model expects FEB2018 to have been a 54m trough. I am placing an 18m peak in MAR2018, where the average value is expected. It is as you can see close to a significant trough, so it may be controversial. But I don’t like where Sentient is otherwise placing it. This model expects we have just seen a 40wk peak, and that we will move down to the next 18m trough in about MAY2019. Following is a bounce to about SEP2019, but from here it is downside movement all the way.

DeMark comments: None. Maybe someone can add ?

Summary:

The highest likelihood scenario, and CML best fit, for EURUSD is solution 2 (also accounting for DeMark info).

For the DXY, same reasoning gives solution 2 as highest likelihood, even with my own assumptions along the way. Their inverse projections match, not with absolute precision, but in a fair degree.

Comments most welcome.