Over the past 2 weeks we have witnessed the dollar break above and then defend the both the 50 day MA and 200 day MA. The dollar also has formed a monthly swing low at month 36 of the three year 3 cycle. All of these events point to the dollar having printed its three year cycle low. However, Thursday’s bearish reversal on the dollar keeps the door open to some different possibilities that we need to recognize.
Thursday was day 19 for the dollar’s daily cycle. The dollar printed a new daily cycle high before printing the bearish reversal today. A break below 80.35 forms a swing high and will signal the daily cycle decline.
Losing the 200 MA and possibly losing the 50 MA in short order is unexpected if the dollar is leaving behind a three year cycle low. And our expectation with a peak on day 19 is for this daily cycle decline to print a higher daily cycle low. However after the ugly reversal today we need to be open to the possibility of a more severe decline. If the dollar breaks below the previous daily cycle low printed on May 8th then all bets would be off for the 3 year low being left behind.
The weekly chart clearly shows that dollar pierced the upper triangle stem, as well as the 50 week MA. However the bearish reversal had the dollar close below the upper stem keeping the weekly triangle consolidation is still in play.
A clear and convincing bullish break to the upside will signal that the dollar’s three year cycle low has been left behind. A clear and convincing bearish break to the downside signals that the three year cycle low is still in front of us.
Today’s bearish reversal on the dollar helped gold deliver a clear and convincing follow through to Wednesday’s swing low.
Thursday was day 2 for the new daily gold cycle. Lately gold has been trading inversely with the dollar. If our cyclical expectation for the dollar holds true and the dollar prints a higher low, that will likely result in a left translated daily cycle for gold. But since the dollar’s weekly triangle is still alive, then so is the possibility of a failed dollar cycle. And a failed dollar cycle would be bullish for gold.
Since the dollar’s big bearish reversal has opened the door to some different possibilities, it will be prudent to keep an open mine to them.