■ Market: Foreign Exchange

■ Trading Assets: EURUSD | DXY

In a time of war and economic uncertainty, investors always seek safety and the US dollar becomes the undisputed king. So far, in 2022, the US Dollar gained 12.75% against the EURO and the US Dollar Index (DXY) went up by 15.54%. Since June 2021, the US Dollar index is up 23.6%.

Starting with the US Dollar Index.

 

The US Dollar Index Historic Bull Runs (1968-2022)

The current +23.6% run of the US Dollar Index is one of the strongest movements of the past 54 years, but not the strongest. These are all key US Dollar Index bull runs since 1967:

• July 1973 - January 1974, +20.9%
• March 1975 – May 1976, +15.9%
• September 1980 – August 1981, +34.4%
• December 1981 – November 1982, +21.4%
• January 1983 – January 1984, +17.6%
• March 1984 – February 1985, +30.2%
• December 1987 – June 1989, +24.6%
• February 1991 – July 1991, +20.5%
• September 1992 – December 1993, +23.5%
• August 1995 – April 1997, +20%
• October 1998 – July 1999, +14.5%
• October 1999 – October 2000, +22.1%
• January 2005 – November 2005, +14.8%
• July 2008 – November 2008, +24.0%
• December 2009 – June 2010, +19.2%
• May 2014 – March 2015, +27%
• May 2016 – December 2016, +12.8%
• February 2018 – December 2018, +10.6%
• June 2021 – Today, +23.6%

The above data suggest that the average US Dollar Index bull run lasts one calendar year. Now, let’s calculate the average returns for the past 50 years.

Table: US Dollar Index Historic Runs

RALLY STARTED	RALLY ENDED	DURATION (in months)	TOTAL RETURN (%)	AVERAGE MONTHLY RETURN
Jul-73	Jan-74	7	20.9	2.99%
Mar-75	May-76	14	15.9	1.14%
Sep-80	Aug-81	12	34.4	2.87%
Dec-81	Nov-82	12	21.4	1.78%
Jan-83	Jan-84	13	17.6	1.35%
Mar-84	Feb-85	12	30.2	2.52%
Dec-87	Jun-89	19	24.6	1.29%
Feb-91	Jul-91	6	20.5	3.42%
Sep-92	Dec-93	15	23.5	1.57%
Aug-95	Apr-97	21	20	0.95%
Oct-98	Jul-99	10	14.5	1.45%
Oct-99	Oct-00	13	22.1	1.70%
Jan-05	Nov-05	11	14.8	1.35%
Jul-08	Nov-08	5	24	4.80%
Dec-09	Jun-10	7	19.2	2.74%
May-14	Mar-15	11	27	2.45%
May-16	Dec-16	8	12.8	1.60%
Feb-18	Dec-18	11	10.6	0.96%
Jun-21	Sep-22	15	23.6	1.57%
AVERAGE		11.68	20.9%	2.03%

As shown in the table, the strongest bull run occurred in 2008, when the US Dollar Index gained 24% in just 5 months with an average monthly return of 4.8%. The second strongest rally occurred in 1973-1974 when the US Dollar Index gained 20.9% in 7 months with an average monthly return of almost 3.0%.

According to the data (1968-2022), the average US Dollar Index bull run lasts 11.68 months (1 year) and offers average returns of 20.9%. The average monthly return during a key bull run is +2.03%.

The current 2022 US Dollar Index run that started on June 2022 already exceeds 12 months and has offered returns of 23.6%. However, the monthly average return of +1.57% is below the historical average of +2.03%.

 

 

EURUSD Technical Analysis

The following chart consists of a classic monthly EURUSD chart (data: FXCM) and the TradingCenter’s unique PriceMomentum chart:

(1) UPPER: monthly EURUSD with RSI Precision (learn more about RSI Precision)

(2) LOWER: TradingCenter’s PriceMomentum Chart (learn more about the PriceMomentum chart)

Chart: EURUSD Monthly Chart & PriceMomentum Daily Chart

We can see the 18-year EURUSD channel on the lower PriceMonentum chart and the breakout in mid-2022. The channel's accurate formation and the breakout's precision highlight the superiority of the PriceMonentum chart over classic charts on longer timeframes.

Maybe, in the future, I will have the chance to code the PriceMonentum chart on PineScript and publish it free on TradingView. Although, I don’t know if it will be technically achievable as the PriceMomentum chart requires a lot of resources (calculations) and that may cause problems for TradingView’s servers.

 

EURUSD Support & Resistance Levels

These are some key support and resistance levels for EURUSD.

■ Key Supply Levels (Long-Term Resistance):

(↑) 1.0520

(↑) 1.0360

(↑) 1.0050

■ Key Demand Levels (Long-Term Support):

(↓) 0.9723

(↓) 0.9560

(↓) 0.9350

(↓) 0.9090-0.9100 (channel)

 

EURUSD Calendar Statistics

These are the monthly statistics for EURUSD based on 18 years of research by TradingCenter. Historically, October is a bearish month for EURUSD, however, November, and especially December, are considerably bullish months. ► More Statistics Here

MONTH	TIMES		RETURN
	↑	↓
OCTOBER	7	11	-0.70%
NOVEMBER	9	9	+0.12%
DECEMBER	11	7	+1.40%

 

Basic Macroeconomic Outlook

These are the key macro figures regarding the US economy and Eurozone:

Eurozone Economic Figures and Forecasts

■ Interest rate: currently 1.25%, expected to rise to 2.0% in early 2023

■ Inflation: 9.1%

■ Unemployment: 6.6%

United States Economic Outlook

■ Interest rate: currently 300-325 bps, expected to rise to 425-450 bps in December 2022

■ Inflation: 8.26%

■ Unemployment: currently, 3.7%, projected to rise to 4.4% in 2023

■ GDP Growth: +0.2% through 2022, +1.2% for 2023 and +1.7% for 2024 (latest FED forecast)

 

The US Dollar Index and EURUSD Analysis -Final Words

In 2022, the US Dollar has skyrocketed against all majors. That is no surprise given the level of uncertainty of the current macro environment and the fast-rising US interest rates. The US rates are expected to rise up to 4.5% by the end of 2022, but no more. In 2023, the FED will have to stop raising rates due to the upcoming economic recession. The turning point for US rates will probably occur in the second quarter of 2023. On the other hand, the Eurozone has to deal with an unseen energy crisis and record inflation. In this environment, the ECB is forced to aggressively raise rates, probably as high as 2.0% by the end of the year. Who knows, probably even more in 2023.

As concerns the US Dollar Index, if it manages to break above 111 points it can go up to 116.8 points in the next few months. However, if the extreme macroeconomic conditions continue in 2023, the US Dollar Index could go as high as 120-121 points. As concerns EURUSD, it can go as low as 0.95 in the next few months. Nevertheless, if the extreme macroeconomic conditions continue in 2023, the EURUSD can go as low as 0.9090-0.9100.

 

■ Forex Trading Analysis: EURUSD October-November 2022

Giorgos Protonotarios, Financial Analyst

for TradingCenter (September, 21st 2022)