Currency Battle

Both the Euro and the dollar are fighting to go lower.

The dollar is overdue for its yearly cycle decline. A break below the 94.50 level would create a lower low, indicating a failed daily cycle and potentially sending the dollar into its overdue yearly cycle decline.

The Euro is overdue to begin its yearly cycle advance. A break above the 1.15 level will create a higher high, signaling the start of the Euro’s yearly cycle advance. The Euro is currently forming a bearish reversal just below the 1.15 level.

If the Euro succeeds in reversing and regaining control of the currency market, that will the dollar higher — stretching out the dollar’s yearly cycle.

The 1/23/15 Weekend Report Preview

The Dollar

The previous week the Swiss unpegs the Franc from the Euro. This week Draghi announces Euro QE. These events have helped to obscure our daily cycle count.

1 $$$ Daily

One possible scenario is that Friday is simply day 25. The daily cycle is forming in a right translated manner and is deep in its timing band to seek out a daily cycle low. We would expect a brief decline soon then a new cycle that breaks to a new daily cycle high.

A second scenario is that the daily cycle peaked the day after the Swiss unpegs from the Euro. A 2 day decline that only marginally breaches the daily cycle trend line and forms a swing high. The announcement of Euro QE would then be day 1 of a new daily cycle.

We will need to be open to either possibility as we wait for further evidence.


After peaking on day 8 stocks declined and broke below the 50 day MA, which usually signals a daily cycle decline.

Stocks regained the 50 day MA and then broke lower, printing a lower low on day 21. Stocks, once again, regained the 50 day MA on Thursday, but then closed lower on Friday. This week also saw a historic Selling on Strength day on Thursday and followed up with a large Buying on Weakness day on Friday, which signals that that bulls are not giving up without a fight.

Still, stocks sport a day 8 peak so this daily cycle still maintains a left translated configuration. This is a bearish setup. Of course a break to a new high negates the day 8 peak and would deliver a very bullish configuration.

Barring a break to a new high, stocks should still decline into a daily cycle low. A daily cycle low is defined as the lowest point following the cycle peak, which is currently day 21. Since day 21 is simply too early for a daily cycle low, stocks would need to break below the day 21 low of 1988.12 to print a daily cycle low.

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Dollar Decision Time


The True Strength Indicator for the dollar has been forming a triangle consolidation for the past 6 months. It looks like it has approached a point where a decision needs to be made.

$ USD decision

A bullish break of the TSI consolidation will lock in a right translated nature to the current daily cycle (as we will see below). A rejection by the upper TSI trend line keeps open the possibility of a left translated cycle forming.

$$$ daily

Wednesday was day 10 for the dollar’s daily cycle. The new high on Wednesday has shifted the likelihood of this daily cycle forming as a right translated cycle. Should a swing high form here, then the possibility of a left translated cycle forming that leads to an intermediate cycle decline and possibly a yearly cycle decline would still be in play.

The EURO has also been forming a much larger, multi year consolidation.


The EURO is in its timing band for a yearly low and a multi-year low. The EURO has ran the stops on the 200 month MA and is at the lower stem of a multi-year triangle consolidation. An intermediate dollar decline that leads to a yearly dollar decline would sync up with the EURO printing its yearly low.

Its About Time


Tuesday was day 22 for the daily dollar cycle. The dollar’s daily cycle normally runs 18 – 25 days from trough to trough. So the dollar is in its timing band to print a daily cycle low.

$$$ Daily

The bearish reversal on day 21 still stands as the cycle peak. A swing high this late in the daily cycle has a good chance of marking the daily cycle decline.

The dollar has also entered its timing band for an intermediate cycle decline.

$ USD weekly

The dollar has printed another higher high this week. Week 18 begins the timing band for an intermediate cycle low. The dollar is on the verge of a daily cycle decline. Following that decline a new daily cycle should extend the weekly cycle out by about 6 more weeks to accommodate for a failed daily cycle to print.

Also notice that the EURO is getting late in its weekly cycle. The EURO is due to begin a new intermediate cycle. Which should coincide with the intermediate dollar decline.

Dollar Standing Tall


The dollar continued its emergence out of its three year cycle low by posting a 93 cent gain on Thursday.

weekly $$$ EUO

The higher high on week 17 locks in a right translated nature to this intermediate cycle. Which means we will expect the next intermediate cycle to go on to print a higher intermediate cycle high.

It is interesting to note that the EURO is now on week 21 and it is in its timing band to print a weekly low, which should happen when the dollar begins its intermediate decline. As we will see below, the dollar has locked in a right translated nature to the current daily cycle. Therefore the earliest we can expect the to see a left translated daily cycle form for the dollar will be the next daily cycle.


A new high on day 18 means that the dollar is now in its timing band for a daily cycle low which can last up to two weeks.

As we noted above, the dollar is on week 17 of its intermediate cycle, I believe that the huge bearish TSI divergence is signaling an impending intermediate cycle decline.

So I think that we will see a brief decline by the buck followed by a brief rally (8 days or less) which will lead into the intermediate dollar decline.

The Miners finally filled the gap that they left behind in June.


So while the dollar has printed its highest high in over a year, the Miners have only given back its gains from the last three months and is still holding above the 200 day MA. And despite the Miners being at its lowest point in close to three months this is a bullish divergence developing on the TSI which is a pre-bullish signal. A reversal off the 200 day MA could mark the daily cycle low.

A Look at the Euro & the Dollar

I have been receiving some requests to take a look at the Euro in relation to the dollar. So tonight we will turn our attention to this comparison.

The dollar printed a yearly cycle low in October. The ensuing intermediate cycle peaked on week 2. You will notice that the initial decline following the week 2 peak did not result in the final weekly cycle decline.

Below is the weekly Euro along with some observations:
The week 2 peak on the dollar coincides with the 17 week intermediate low on the Euro.
The 28 week intermediate low on the dollar coincides with the week 26 peak on the Euro
The week 4 peak coincides with the 30 week intermediate low on the Euro.

The Euro appears to be rallying out of an intermediate low as the dollar’s weekly cycle is declining. As we saw in November through December that this may not be the dollar’s final intermediate decline. In fact we need to keep an open mind to the different possibilities until the dollar breaks out of the weekly triangle consolidation. And if the dollar bounces off the lower triangle stem then that will pressure the Euro.

Currently the dollar has formed a daily swing low while the Euro has formed a daily swing high. The dollar lost both the 200 MA and the 50 MA during this daily cycle decline. Regaining these moving averages would be consistent with leaving behind a three year low. Rejection by these moving averages signals that the final three year decline is still in front of us.

The dollar has averaged printing a three year low every 35.5 months for over thirty years. May was month 36 for the dollar’s three year cycle and the Euro was rejected be the declining multi year trend line in May. Two of the previous three times the Euro was rejected by the multi year declining trend line saw the dollar print a three year low. And the Euro just got rejected again in May by the declining multi year trend line.

The 12/05/13 Morning Report

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The dollar’s daily cycle peaked on day 10. Since then it has been trading sideways making it challenging to identify if a cycle low has printed.

$$$ R

In real time, day 18 and day 23 both look like daily cycle lows. Well this morning the dollar broke lower again and has since reversed. The question is if this is a new failed daily cycle or an extended day 29 cycle low?

The EURO suggests an extended day 29 low.


The EURO has rallied out of an early November intermediate cycle low. Today is day 19 of the current daily EURO cycle. At 19 days, the EURO has virtually locked in a right translated nature to this daily cycle. The EURO is “due” to decline into a daily cycle low. With the expectation that this will be a right translated cycle, we can expect a brief decline into a DCL, which would sync up with a short dollar rally.

The 12/02/13 Morning Report

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The dollar appears to have found its footing and is catching a bid this morning.

DXY00 Commodity Futures Price Chart for U S D

The overnight action on the dollar has caused it to break above the declining trend line. In the Weekend Report we discussed how in real time that day 18 looked like a daily cycle low, but there was the potential for day 23 to actually mark the daily cycle low. What I said was “If the dollar forms a swing low and breaks above the second declining trend line, then that will shift the odds in favor of the daily cycle low moving out to Friday.” Since Wednesday is the lowest point following the day 10 peak, that will mark the cycle low.

One of the concerns with labeling day 18 as a daily cycle low was that the following pop did not go on to print a higher daily cycle high. If day 18 was the cycle low, then the daily cycle formed as a right translated cycle and the expectation would be to see a higher daily cycle high.

Now the daily cycle low forming on day 23 gives us a left translated daily cycle for this first intermediate cycle. And there is not expectation, under cycle theory, for a left translated cycle to print a higher high.

Our intermediate framework is looking for the dollar to continue lower. What we see the EURO doing supports this framework.

E6 Y00 Commodity Futures Price Chart for Euro F

The EURO has formed a swing high and will likely seek out its daily cycle low. With a peak on day 15, the odds are good to see this daily cycle form as a right translated cycle printing a higher daily cycle low.

The bigger picture shows that the EURO printed an intermediate low in July. After four daily cycles, it just printed an intermediate low in early November.

So we have the dollar seeking out an intermediate low and the EURO is still in the first daily cycle of a new intermediate cycle.

We can expect to see this new daily cycle for the dollar peak on or before day 8 and rolling over into a failed, left translated cycle.

$$$ down

The 11/01/13 Morning Report

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We have been watching the dollar trying to ascertain if a new intermediate cycle has begun. This morning we will look to the EURO for clues to the dollar’s intention. Beginning with the weekly chart.

euro weekly

The EURO printed a multi-year low in July, 2012. The yearly low printed in April and was back-tested in July. Currently the EURO is on week 16 of its intermediate cycle.

weekly swing

This week the EURO is in the process of printing a bearish reversal and has formed a weekly swing high. These are signals that the intermediate cycle has topped and is ready for an intermediate cycle decline.

So now we will switch to the daily chart.

euro daily

The current daily cycle has peaked on day 7 and sits at day 12. A peak on day 7 has a good chance of forming as a left translated cycle. A break below 1.34723 delivers a failed daily cycle and confirms an intermediate cycle decline.

A confirmation of an intermediate cycle decline for the EURO should correspond with the dollar confirming its intermediate cycle ascent.


Dollar Dilemma …

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Today’s upside surprise on the dollar signals that May 1st marks the daily cycle low making today day six of a new daily cycle.

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At the time we considered that May 1st marked a daily cycle low. However, part of our thinking was it really was too early for a DCL. Yesterday’s breakdown fit our expectation of the dollar continuing into an intermediate cycle decline.

I pointed out earlier that contra-trend rallies normally do not extend past 4 days once the cycle is in decline. So today’s reversal signals a new daily cycle.

However, our expectation of a continued dollar sell off was well reasoned. There are 59 daily cycles between the March 2008 Super Cycle Low and the September 2008 Yearly Cycle Low. Of those daily cycles, only 4 of them printed a daily cycle 11 days or less. So there was over a 93% likelihood of a continued dollar decline.

So the next thing to determine is if this is the fourth daily cycle of the intermediate cycle or does this mark a new weekly cycle?

Well as you can see on the above daily chart a break above 83.19 forms a higher high, thus breaking the pattern of lower highs.

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This is either week 14 of the weekly cycle or week 1 of a new intermediate cycle. Thanks to the dollar surge today, the dollar has formed a weekly swing low off the week 13 candle. As we just discussed, a break above 83.19 forms a higher high. It would also see the dollar break above the declining weekly cycle trend line confirming a new weekly cycle.

Of the 78 intermediate cycles studied between 1978 and 2008 only 10 printed an intermediate cycle low at 13 weeks or less. Which is only 12% possibility. However if this is a new intermediate cycle, that would extend the yearly cycle.

If this is the last daily cycle we can expect it to peak on or before day 8. Then print a daily and intermediate cycle low in about 4 – 5 weeks which takes us out into June.

If this is a new intermediate cycle that could extend the yearly cycle out to September. Also, if this is a new intermediate cycle we can expect it to form as a left translated weekly cycle as it declines into its yearly cycle low.

pk34145 was interested in comparing the dollar to the EURO so lets take a look.

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The EURO shows a trend line break on day 11 signaling a daily cycle decline. With a day 5 peak, this could turn out to be a left translated daily cycle.

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If the EURO daily cycle fails, that would signal the the weekly EURO cycle is in decline. With a week 4 peak and currently on week 5, that could mean another 10 – 15 weeks of a declining EURO.

So there are some different scenarios to consider.
Whether or not the dollar is rejected by the 83.19 level will determine which way we go …

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