Cycle Trading

Pre-Summary

Most traders assume the Daily Cycle Low must occur at the lowest price following a cycle peak. While that is often true, there are exceptions. The Dollar is currently demonstrating one of those exceptions as consolidation continues to shift the likely Daily Cycle Low away from the initial low and toward the apex of the pattern.

After forming a swing high, the Dollar closed below the 10-day moving average and printed its lowest point on Day 25. Under normal circumstances, that low would become the leading candidate for the Daily Cycle Low. However, markets do not always follow the typical script.

Instead of delivering bearish follow-through, the Dollar has spent the past several sessions consolidating beneath the 10-day moving average while holding above support at 100.56. Friday’s bullish reversal suggests selling pressure may be fading rather than accelerating.

What is clear is that the consolidation is changing the structure of the cycle. In triangle consolidations, the Daily Cycle Low can migrate away from the initial low and develop closer to the apex of the pattern. If buyers break the Dollar out of its current consolidation, Friday may become the point that we ultimately label as the Daily Cycle Low rather than Day 25.

The next trigger is straightforward. A bullish breakout from consolidation, followed by a close above the 10-day moving average, would indicate a continuation of the daily uptrend and signal a cycle band buy signal. At that point, Friday, Day 31, would be labeled as the Daily Cycle Low.

Until then, the Dollar remains in a daily uptrend, but the current consolidation continues to provide valuable information about how cycle lows can evolve before they are signaled.