I’m not entirely sure what the Dollar is trying to do here, but it’s getting hard to ignore the strength. As far as the Cycles stand it’s telling me that at least a Daily Cycle Top should be just about in. The wildcard now is whether this 7 day surge has greater Investor Cycle implications. If a new Investor Cycle is in play, it will have a significant impact on where the dollar is headed and will alter the outlook for the precious metals.
I try to always respect price, but something about this move just doesn’t feel right to me. This is a Day 12 high with a strong close above the Bollinger Band, so regardless of the Week count we should see a 3-7 day decline into a DCL.
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The dollar strength is showing up across all of the major currencies, so we know this surge is real. The Yen is locked in a multi-month free-fall and we’re now seeing significant declines in the Aussie dollar too. The Euro has been consistently negatively correlated of late and it’s therefore a pretty good proxy for the Dollar’s movements.
If the Dollar is about to top for the Daily and Investor Cycles then the Euro should manage to retest the March lows and reverse higher again for the next few weeks. But the chart looks ominous for the Euro as a massive weekly head and shoulders pattern looks to be playing out. This could well suit what we’re seeing with the Dollar, now that it has made new 3 Year Cycle highs.
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The dollar Investor Cycle chart is definitely bullish; there is no way this strength could be ignored. I’ve reported all along that on a weekly level we’ve seen a continuous series of higher Cycle lows and tops since the 3 Year Cycle Low over a year ago.
If this strength continues then it will be a challenge labeling the Investor Cycle. With the naked eye this still appears to be a final move to an IC top before the dollar reverses down to its ICL. The technical indicators and oscillators never retraced anywhere near ICL levels and the surge came from an early Week 13 count. Sentiment barely retraced and remains at elevated levels, so in all I don’t see why this should be labeled as anything other than a powerful Right Translated Investor Cycle that is topping in Week 15/16.
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If this does end up being the start of a new Investor Cycle, then we won’t know for sure until the next Daily Cycle. The next dollar Daily Cycle should top very early and form Left Translated. If however it goes on to make new IC highs then it will almost certainly be the 2nd Daily Cycle of a young Investor Cycle. If this occurs, then gold will also form Left Translated and drop again, likely making yet another deeper low in June.
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