EURUSD and DXY have officially tagged the targets we set for them several months ago. Recall that in the Mar 7 Update on Currencies, we noted that the Ukraine invasion could accelerate DXY’s next leg up.
The yellow .707 at 106.276 and white 1.272 at 106.741 both intersect the white channel top in late 2022 – but it seems unlikely that DXY would wait that long to make its move given the fluidity of the Ukraine invasion.
We noted in April that DXY had broken out of its rising red channel and, based on our analog, was likely to reach the target in July – which is exactly what it did.
The move was made possible, of course, by EURUSD crashing as we expected. From that same post:
There are many potential targets between here and the H&S target of .785. The first is the 1.06 lows from 2020, followed by the 1.03 lows from 2016. Once those break down, of course, the euro will face the 1.000 support, also the yellow .618, possibly as early as mid-March.
The ECB fought the breakdown as long as it could. With inflation and fragmentation both surging, the current plunge has caught many off guard.
Then there’s the hapless BoJ, sitting quietly in the corner hoping that no one notices just how fundamentally broken it is. We’ll update all the big picture charts today, focusing on their connection to the plunge in equities over the next two weeks.
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