The ECB sent a strong signal today that it is completely ready to expand its quantitative easing program if necessary. That sent the dollar surging higher, breaking above both the 50 day MA and the 200 day MA. The dollar also closed above the upper daily cycle band which signals that the dollar is in a new daily uptrend.
As we discussed last night, the previous daily cycle failed which sets up the expectation for this cycle to form as a left translated cycle and fail as well. The dollar would need to roll over by day 8 to assure us of a left translated cycle formation. The other thing to watch for is the previous daily cycle high. If the dollar breaks above the previous daily cycle high of 96.88 that will negate the failed daily cycle
Let’s look at the weekly chart to see if we can put today’s move in perspective.
The dollar has been consolidating its move out of its 3 year cycle low by printing a series of lower weekly cycle highs. It has been unclear if the yearly cycle low for the dollar printed in May or if it extended out to August. A bullish break above the declining weekly trend line indicates that the yearly cycle low printed in August. A bearish break below the lower trend line signals that May hosted the yearly low and the dollar is now in a failed yearly cycle.
Oil delivered a bullish surprise in the face of a strong dollar.
With the dollar surging higher today, intuitively I would have expected for oil to tank. Instead oil formed a swing low today.
The daily oil cycle peaked on day 33 and printed its lowest point yesterday, which was day 41. That places oil squarely in its timing band to print a daily cycle low. The oil found support at the 50 day MA and the lower daily cycle band and formed a swing low today. Now a break of the declining trend line will confirm a new daily cycle for oil.