US Dollar Rebounds off of Trading Range Support

| September 1, 2011

The US Dollar index closed moderately higher for a third straight session, reacting further off of the lower boundary of the consolidation formation that has been developing since early May and breaking above resistance at the upper boundary of the short-term downtrend from early July.

The index has been confined to a trading range between 73.50 and 76.20 for four months and a close well outside of this area will predict the direction of the next meaningful move with a high degree of statistical confidence. With respect to cycle analysis, the index has moved up to a new closing high for the short-term cycle from mid-August and a return to the alpha high (AH) of the previous cycle during the beta phase rally would suggest that cycle translation is in question once again.

The dollar has been effectively trendless during the last five cycles and we have entered the window during which the next intermediate-term cycle low (ITCL) is likely to occur, so a sustainable bottom may be in the process of forming.

Additionally, we are approaching the window during which the next long-term cycle low (LTCL) is likely to occur.

The LTCL will almost certainly develop in conjunction with one of the next two ITCLs, so a meaningful countertrend rally of several months in duration will likely begin sometime during the next month or in early 2012.

Category: Commentary, Market Update


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