Cycle Trading

Someone on the Weekend Report blog asked about the Aussie dollar pointing out that understanding where the Aussie is could help explain where commodities are.

Let’s take a look — starting with the Aussie Yearly cycle.

Over the past 10 years the Aussie’s yearly cycle has ranged from 8 months to 19 months. The Aussie currently sits at month 12 and has just broke below a multi-year support level. Please notice how the Aussie is stretched over 10% below the 20 month MA. The last time the Aussie got this stretched below the 20 MA was back in 2008. That resulted in a multi-year snap-back rally. The Aussie prints a yearly low on average every 13 months. So currenty the Aussie is in the timing band for a yearly cycle low. A fair assumption here is the Aussie could print a yearly cycle low at the next intermediate cycle low.

So now let’s get a handle on the Aussie’s intermediate cycle.

Over the past three years the Aussie’s intermediate cycle ranged 14 weeks to 25 weeks, aside from one outlier at 11 weeks. And on average, the Aussie printed a weekly low every 16.375 weeks. The Aussie is currently very stretched below the 20 week MA and is in the timing band for an intermediate cycle low. So while it appears that both the weekly and monthly cycles are in the timing band for a cycle low, the daily cycle appears to need more time.

Over the past year the Aussie daily cycle has ranged from 18 to 29 days. Currently the Aussie sits at day 12 and appears to be forming a bear flag. (There is a possibility that last Friday was day 35 and today is day 4). So my best guess is that the Aussie has another 1 to 3 weeks before printing a daily cycle low.

And that daily cycle low should also trigger an intermediate and a yearly cycle low.

G’day Mate …