Cycle Trading

The dollar appears to have found its footing and is catching a bid this morning.

The overnight action on the dollar has caused it to break above the declining trend line. In the Weekend Report we discussed how in real time that day 18 looked like a daily cycle low, but there was the potential for day 23 to actually mark the daily cycle low. What I said was “If the dollar forms a swing low and breaks above the second declining trend line, then that will shift the odds in favor of the daily cycle low moving out to Friday.” Since Wednesday is the lowest point following the day 10 peak, that will mark the cycle low.

One of the concerns with labeling day 18 as a daily cycle low was that the following pop did not go on to print a higher daily cycle high. If day 18 was the cycle low, then the daily cycle formed as a right translated cycle and the expectation would be to see a higher daily cycle high.

Now the daily cycle low forming on day 23 gives us a left translated daily cycle for this first intermediate cycle. And there is not expectation, under cycle theory, for a left translated cycle to print a higher high.

Our intermediate framework is looking for the dollar to continue lower. What we see the EURO doing supports this framework.

The EURO has formed a swing high and will likely seek out its daily cycle low. With a peak on day 15, the odds are good to see this daily cycle form as a right translated cycle printing a higher daily cycle low.

The bigger picture shows that the EURO printed an intermediate low in July. After four daily cycles, it just printed an intermediate low in early November.

So we have the dollar seeking out an intermediate low and the EURO is still in the first daily cycle of a new intermediate cycle.

We can expect to see this new daily cycle for the dollar peak on or before day 8 and rolling over into a failed, left translated cycle.