Relative Strength

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Gold has been trading inversely to the dollar recently. This has set up an expectation to see gold correct once the dollar emerges from a daily cycle low.

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The dollar appears to have printed a daily cycle low on Thursday and instead of correcting, gold displayed relative strength.

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The dollar printed its lowest point on Wednesday, day 25, following the day 20 peak. At 25 days, that places the buck late in its timing band for a daily cycle low. The swing low on Thursday has good odds of marking the daily cycle low.

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Last week gold was late (26 weeks) in its timing band to print an intermediate cycle low. So a new daily cycle had an excellent chance to also signal a new intermediate cycle. But there was concern that a rallying dollar could extend the intermediate gold decline. Instead, gold closed above the declining intermediate trend line in a clear and convincing manner on Thursday to confirm that gold is in week 1 of a new intermediate cycle.

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