■ Market: Foreign Exchange

■ Trading Assets: EURUSD | DXY

In times of war and economic uncertainty, investors seek safety, and the US dollar becomes the undisputed leader. In 2022, the US dollar rose 12.75% against the euro, and the US Dollar Index (DXY) increased by 15.54%. Since June 2021, the DXY has gained 23.6%.

Starting with the US Dollar Index.

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

The current 23.6% rise in the US Dollar Index is one of the strongest movements in the past 54 years, though not the strongest. Below are the major 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 data above suggest that the average US Dollar Index bull run lasts about one calendar year. Next, let’s calculate the average returns over the past 50 years.

Press the following slider to reveal the table.

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

According to data from 1968 to 2022, the average US Dollar Index bull run lasts about 11.7 months (roughly one year) and delivers average returns of 20.9%. The average monthly return during a major bull run is 2.03%.

The current 2022 US Dollar Index rally, which began in June 2022, has already lasted more than 12 months and produced returns of 23.6%. However, the average monthly return of 1.57% is below the historical average of 2.03%.

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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 EUR/USD channel on the lower PriceMomentum chart and the breakout in mid-2022. The precise formation of the channel and the accuracy of the breakout demonstrate the superiority of the PriceMomentum chart over traditional charts on longer timeframes.

In the future, I may have the opportunity to code the PriceMomentum chart in PineScript and publish it for free on TradingView. However, it is unclear if this will be technically feasible, as the PriceMomentum chart requires extensive calculations, which could create performance issues for TradingView’s servers.

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EURUSD Support & Resistance Levels

Here are some key support and resistance levels for EUR/USD:

■ 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)

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EURUSD Calendar Statistics

These are the monthly statistics for EUR/USD based on 18 years of research by TradingCenter. Historically, October tends to be bearish for EUR/USD, while November—and especially December—are generally bullish months.🔗 More Statistics Here

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

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Basic Macroeconomic Outlook

These are the key macro figures regarding the US economy and the 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)

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The US Dollar Index and EURUSD Analysis -Final Words

In 2022, the US dollar has surged against all major currencies, which is unsurprising given the high uncertainty in the macro environment and rapidly rising US interest rates. US rates are expected to reach 4.5% by the end of 2022, but no higher. In 2023, the Fed will likely pause rate hikes due to the approaching economic recession, with a potential turning point in the second quarter. Meanwhile, the Eurozone faces an unprecedented energy crisis and record inflation, forcing the ECB to raise rates aggressively—potentially reaching 2.0% by year-end, or even higher in 2023.

Regarding the US Dollar Index, a break above 111 points could push it to 116.8 in the coming months. If extreme macroeconomic conditions persist in 2023, the index could reach 120–121 points. For EUR/USD, the pair could drop to 0.95 in the near term, and under continued extreme conditions, it could fall as low as 0.9090–0.9100.

 

■ Forex Trading Analysis: EURUSD October-November 2022

Giorgos Protonotarios, Financial Analyst

for TradingCenter (September 21st, 2022)