updated: May 16, 2017

In our last major update on the EURUSD [see: Nov 25 Update] I attempted to tie together currencies, oil and equities in one nice, neat package. My basic premise from that post:

  • DX would top at our 102.098 target even though a rate hike was imminent
  • USDJPY would rally strongly into year end, despite the fact that DX was topping
  • EURUSD, having shed 5.9% since our top call in September, would rally to 107-108

Things worked out pretty much as forecast. DX topped out at 103.82, making no appreciable gains after the rate hike. USDJPY rallied through the year end, tacking on an additional 5.4% before topping out. And, EURUSD rewarded us with a pop to 1.0873 in only two weeks time. The only thing I wasn’t too sure about was when oil would top.

Suppose OPEC pulls it together and CL starts another leg higher now? Stocks will soar, allowing USDJPY and DX to come back to earth. EURUSD will rebound very strongly — not merely enough to prop stocks up for a month or two. We’d likely be looking at a rally of several months. Targets would start at 1.0756-1.0815 and go higher.

Since then, SPX has rallied 9%. DX has dropped 5.6%, nearly tagging our target from May 1. USDJPY shed 8.7%, nailing our Apr 3 target before getting a nice bounce. And, after popping slightly higher than expected, EURUSD slumped 4.9% over the next several weeks.EURUSD came within .0114 of our downside target (established in early 2015) before beginning a steady recovery that has seen it climb 7.5% from its lows. We’ll take a look at why it couldn’t hold the December highs, why it couldn’t quite reach our downside target, and where it goes next.

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