Cycle Trading

Is the dollar entering a bubble phase?

The dollar emerged from its 3 year low in May, 2014. After a brief sideways chop, the dollar went on to rally for over 27%.

During that rally, the dollar’s daily cycles were characterized by peaking above the upper daily cycle band and printing lows above the lower daily cycle band.

An early bullish signal was delivered in August of 2014 when the dollar formed a daily cycle low above the upper daily cycle band.

In 2014 the dollar emerged from its July daily cycle low, peaked on day 25. A trend line break and a swing high formed on day 27. Then after 6 more days of consolidation the dollar rallied higher. Day 27 was the lowest point following the day 25 peak and it formed above the upper daily cycle band. So we were forced, back then, to recognize day 27 as a daily cycle low.

It appears that the dollar is in a similar set up.

The daily cycle peaked on day 24. It formed a swing high and delivered a trend line break on day 25, which signals the daily cycle decline. But the dollar formed a swing low on Friday and then broke out to a new high on Monday.

It is possible that the daily cycle is stretching. But the trend line break (seen below) with the dollar being in its timing band for a daily cycle low has been reliable for helping spot daily cycle declines.

I would like to see a close above the previous daily cycle high before labeling day 25 as the daily cycle low. But if last Thursday was the daily cycle low, then the dollar would have printed a DCL above the upper daily cycle band. So unless the dollar closes below the upper daily cycle band, then the dollar remains in a daily uptrend and possibly in a bubble.