Euro angst = Dollar strength

October 19, 2016 09:00 AM

The Cycle Projection Oscillator (CPO) is a technical tool that uses complex algorithms to filter multiple cycles from historical data, combines them and gives a graphical representation of their productive behavior. The CPO methodology employs proprietary statistical techniques to obtain cyclical information from price data. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.

U.S. Dollar index

While the CPO is a completely technical oscillator, it is a bit difficult running this in front of an FOMC meeting that could produce a surprise. That being said the CPO is so long-term in nature that it is supposed to anticipate these things. Currently it is looking for an upswing in the dollar. The CPO has the dollar rising into the election and then after a brief rest in November, continuing its rally into yearend. 


The British pound has been seeing an upswing of late after recovering from the shock of the Brexit vote. The CPO is indicating that the current rally may be a touch overdone and that the cable is approaching overbought territory. However, long-term, the CPO sees the pound launching a long-term rally sometime after the U.S. Presidential elections. Any retreat from the current strength should be a decent buying opportunity in the pound. 


After the surprise Brexit vote, which pushed it into a tailspin, the euro has had an impressive rally this summer. So much so that the CPO is showing the euro in an extremely overbought position. Not only does the CPO show the euro as overbought, but is also expecting it to begin a major downturn lasting to around Christmas. This represents a major selling opportunity. The Eurozone is dabbing with negative interest rates, there is political turmoil in its largest economy and the continent is very worried over the prospect of a Trump presidency.

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at @cpopro1. You can reach John at