Cycle Counts For US Dollar

 

The dollar has made a Day 16 high which guarantees a Right Translated Cycle. This is bullish action, especially when viewed in isolation. But what we have driving the currency market here is the Euro correcting into an ICL after what was a very long and sustained IC rally.

Mario Draghi and the ECB will announce their policy response this week to what has become a rapidly slowing inflation outlook. The expectation is that they will lower rates to stimulate growth and lower the Euro.  This in theory should drive the dollar higher, but as the Euro is oversold already, we could be in for a case of the “news being priced in”.  Based on the fact that the Dollar is overbought and due a Cycle high, it looks as if the reaction to the ECB might take many by surprise and instead be (at least short-term) bullish for the Euro. This should help to drive the dollar into a shallow DCL, temporary relieving the Euro of its oversold status, before the Euro falls again into a deeper ICL during the early summer.