Cycle Trading

Summary

• The dollar is in the process of breaking back below the 10 day moving average.
• Momentum from the recent day 24 daily cycle low has stalled.
• Price remains pinned along the 15-year trend line.
• Today’s dollar weakness supported strength in stocks and precious metals.

The dollar weakened today and is now in the process of breaking back below the 10 day moving average, signaling that upside momentum from the recent day 24 daily cycle low is already fading.

While the swing low and close above the 10 day moving average allowed us to label day 24 as the DCL, the lack of follow-through keeps the daily downtrend firmly intact. The dollar will remain in its daily downtrend unless it can close above the upper daily cycle band.

Price also continues to crawl along its 15-year trend line. So far, the dollar has been unable to separate meaningfully from this level, and today’s weakness increases the risk of a rejection from long-term resistance.

Today’s decline helped support gains in both stocks and precious metals, reinforcing the theme from recent posts: the dollar remains the key cross-market driver. As long as the dollar struggles, risk assets have room to firm.

Takeaway

The dollar’s move back below the 10 day moving average keeps the daily downtrend intact and continues to provide a supportive backdrop for risk assets.