Cycle Trading

Pre-Summary

The Dollar is beginning to consolidate after becoming stretched above the 10 day MA early in its new daily cycle. At the same time, Gold is on day 32 and attempting to form a reversal inside its timing band for a DCL. The different cycle positions could create an interesting sequence between the two markets.

The Dollar printed its lowest point on day 27

The dollar went on to signal a new daily cycle. The Dollar quickly became stretched above the 10 day MA by day 5 and now appears to be beginning a consolidation above the 10 day MA. This will help to allow the 10 day MA time to catch up to price. The Dollar is currently in a daily downtrend. The Dollar will remain in its daily downtrend unless it closes above the upper daily cycle band. 

Meanwhile, Gold Is Seeking Its DCL

Gold closed below both the 10 day MA and the 200 day MA on Friday to signal its daily cycle decline.Monday is day 32, placing Gold in its timing band for a DCL. Gold is in the process of forming a reversal and we will be watching for a swing low.A swing low with a close above the 10 day MA will indicate a continuation of its daily uptrend and signal a cycle band buy signal. We will then label day 32 as the DCL.Gold is currently in a daily uptrend. Gold will remain in its daily uptrend unless it closes below the lower daily cycle band. 

One Possible Roadmap

This is where the different cycle positions become interesting.

Dollar:
New daily cycle → stretched above 10 day MA → consolidation develops → 10 day MA catches up → possible continuation toward the declining 50 day MA.

Gold:
Daily cycle decline → DCL timing band → reversal develops → DCL confirmation → new daily cycle.

The Dollar does not necessarily need to decline for Gold to form its DCL.

A consolidation in the Dollar could provide Gold enough room to complete its DCL and begin a new daily cycle. If the Dollar subsequently resumes its advance toward the declining 50 day MA, Gold could consolidate after beginning its new daily cycle.

And if the Dollar eventually reaches the declining 50 day MA and is rejected, Gold could already be positioned in a new daily cycle to resume higher. That is one possible roadmap.

Confirmation will be needed at each step.

The Dollar and Gold are often viewed through the lens of an inverse relationship. But their different cycle positions can create periods where that relationship is less straightforward. Right now, the Dollar is early in a new daily cycle while Gold is in its timing band for a DCL. We will continue to watch how the two cycles develop.