Cycle Trading

The dollar’s volatility has been keeping me on my toes. Recall back on January 23 the dollar had a big sell off that looked like a more severe decline was at hand only to see the dollar print a bullish reversal on day 19. Then the next two daily cycles printed lows short of the normal timing band for a daily cycle low.

Now the dollar has had a powerful start to this daily cycle that broke above the declining intermediate trend line but has paused at the declining 50 moving average. A new intermediate cycle should see the dollar regain the 50 MA and go on to form as a right translated daily cycle peaking after day 12. Instead we saw the dollar form a swing high on day 7. Now recall that most left translated dollar cycles peak on or before day 8. Therefore we need to be open to the possibility that the daily cycle has peaked. So we need to see if the dollar provides more follow through too the downside. If so, the that would indicate the gravitational pull of a three year cycle low has taken hold of the dollar.

Despite the dollar being down, gold continued lower today as it seeks out its own daily cycle low.

Monday was day 16 for gold’s daily cycle. The daily cycle decline has gold approaching a convergence of the 50 and 200 day moving averages. A narrow range day that tags the convergence could set up a potential cycle low. But today’s drop saw gold break below the previous low print on 2/28 thus forming a failed daily cycle.

The intermediate trend line is in agreement with a failed daily cycle, a weekly swing high and the bearish crossover of the weekly True Strength Indicator. Therefore, we could still see a bounce into a new daily cycle for gold be then expect the dollar higher as gold continues lower into its intermediate cycle decline.