Cycle Trading

Below is a 42 year monthly chart of the Japanese Yen.

You will notice right away the parabolic spike in 1995, the rally to new highs in 2012 and the historic collapse that is currently in progress.
Below I will add some observations

The Yen appears to follow an eight year pattern of printing a multi year low:

* Beginning in 12/75 the Yen rallied 77% to its cycle peak in 1978 and then printed its cycle low in 10/1/82, a 7 year cycle.

* Then in 1982 the Yen rallied 131.6 to its next cycle peak 1988 and then printed its cycle low in 4/1990, an 8 year cycle.

* The next rally out of the 1990 cycle low ran 99.18% peaking in 1995 and then printed its cycle low in in 8/1998, an 8 year cycle.

*The 1998 – 2007 was a 9 year cycle that involved a multi year triangle consolidation featuring lower highs and higher lows. In this cycle the cycle low is not the lowest point following the cycle peak but the lowest point in the apex.

* The current cycle began in June of 2006 rallied for 64% and peaked in October of 2001.

So the Yen (obviously) is caught in the grip of its 8 year cycle decline. These 8 year cycles have ranged from 7 to 9 years. The previous 8 year cycle did run 9 years. We could see the cycles balance out with a 7 year cycle.

Now lets break this down on a yearly cycle basis.

So the JPY is in an 8 year cycle decline and is 13 months into its current yearly cycle. Past performance certainly suggests a yearly cycle low to print in April or May.

Now let’s compare the JPY to the Dollar:

Two things pop out to me.
1) Generally the JPY and the dollar trade inversely.
2) For such a fierce sell off currently on the JPY, the dollar is managing only a marginal rally.

OK, so now we will turn our attention to the dollar.

April is month 7 for the yearly dollar cycle and month 23 for the current three year cycle. Most yearly cycles are comprised of 2 intermediate cycles. The dollar is currently in the second intermediate cycle for the current yearly cycle. Therefore, the dollar may very well be seeking out its intermediate cycle low as well as its yearly cycle low.

If a yearly cycle low forms in the next couple of months, that would take the yearly cycle out to either May or June which brings the three year cycle count either month 24 or 25. That means we will likely see one more yearly cycle unfold for the dollar setting up a three year low for the dollar sometime in 2014.

So the dollar may be on the cusp of a yearly cycle decline. If it breaks below the previous yearly low from September, then the dollar would deliver a failed yearly cycle. A failed yearly cycle would put the previous three year cycle low in jeopardy. And if the dollar breaks below the previous three year low that would put the 15 year super cycle in jeopardy.

So let’s take a look at the previous two 15 year dollar super cycles.

You will notice that as both super cycles are embedded with five 3 year cycles. The first 3 embedded three year cycles of previous 2 dollar super cycles were wildly bullish for the dollar. As the dollar rallies into its 15 cycle year peak, each embedded three year cycle prints a higher three year high.

Below we are going to look at the second half of the previous 15 year super cycle and the current super cycle.

Now notice above instead of a wildly bullish period for the dollar, since the 2008 super cycle low the dollar has continued a patterned of lower highs, even after printing a 15 year super cycle low.

The point is that the Japanese have been debasing their currency for sometime now. But now that the 8 year cycle peaked and the Yen is in a 8 year cycle decline, the chickens have come home to roost.

Ben has been printing money at an unprecedented rate, currently 85B per month. The Yen crashing into its 8 year low may be the blueprint the dollar will follow as its seeks out its three year low …

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Don’t forget to check out the Weekend Report Preview: https://likesmoneycycletrading.wordpress.com/2013/04/20/the-41913-weekend-report-preview/

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