DXY cycle study suggests weakness ahead: Friday 23 July 2021

This is the DXY to the end of June 2019. We will conduct our cycle analysis exercise using data until that date i.e. the last ~2 years of data act as our testing/verification set.

Below I show the chart with the full data. Timing Solution shows the Learning Border Cursor (LBC) by shading the training and test data in light-blue and magenta respectively.

Next, we add a de-trended oscillator of the DXY as an overlay to the price chart (purple line).

Now we run a spectral analysis on the pre-July 2019 data to identify the dominant cycles providing the closest fit to the training and the test data. We project this forward from July 2019 (red line).

Next, we run a sanity check on the dominant cycles obtained by the classic spectrum. We do this using different methods. The first (blue line) shows a potential red-zone in the near-term.

The second (green line) shows something similar.

Given that we are also entering the period of the year that the DXY has seasonal headwinds, could it be that support in the 1.1650/1.1700 range in EUR/USD kicks off a 5th-wave rally to 1.25/1.26? This is the trade setup I am implementing.