The Struggling Euro 10


I have been watching the Euro (see also this post) for signs that the big magnitude trough that I am expecting to form has occurred. In September 2014 I wrote about this trough, and mentioned the difficulty with the sub-division of the 54-month cycle. This makes it very difficult to be confident with a projection for the time that the 54-month (and perhaps 9-year) cycle trough is expected.

Here are some options for you to consider:

An inverted cycleThis is my preferred analysis, but the problem with it in my opinion is that circled 18-month cycle, which I describe as an “inverted” cycle shape because the central 40-week cycle trough is a deeper trough than the 18-month cycle troughs on each side of it.

This analysis avoids that problem:

A distorted 18-month cycle

But it avoids the problem by creating another one: a very long 18-month cycle of over 24 months. There is another possibility which I touched on in September last year, which is that the 54-month cycle is sub-dividing into only two cycles, instead of three. Here is that analysis:

2:1 Harmonic ratios

Whichever analysis is the true one, the fact remains that we are expecting a long cycle trough to form now the Euro. A long cycle trough formed in the British Pound – US Dollar in January 2015, and probably also in Crude Oil. But has that trough formed in the Euro?

I like to watch the shorter cycles develop as price moves out of a potential long cycle trough. Here is the shape that has formed in the Euro since the trough of 26 January 2015 (the day after the Greek elections it is interesting to note):

A neutral cycle

It is certainly not a very bullish 40-day cycle. It is neutral at best, and that is only if the 40-day cycle trough forms soon.

The interesting thing is that while it is not a bullish cycle, as would be expected from the first 40-day cycle following a 54-month cycle trough, it is also not a very bearish cycle, as would be expected from the last 40-day cycle preceding the 54-month cycle trough (as shown in the above analysis).

The answer is most probably that this is not the last 40-day cycle into the 54-month cycle, but that we have at least one more 40-day cycle which will be very bearish, probably carrying the Euro down to parity with the US Dollar (or below).

But I like to play Devil’s Advocate, and I should point out that I have seen this behavior before, by which I mean a very sluggish start to a long cycle, with a neutral cycle forming before the big bounce happens. Or of course it can be looked at the other way – the last cycle before the big cycle trough is neutral as opposed to bearish.

A good example of this played out in the NASDAQ from November 2008 to March 2009:

A neutral shaped cycle

Most stock markets formed their 54-month (or longer) cycle troughs in early March 2009, but the Nasdaq had a slightly lower trough the previous November. In fact the lower prices in November were only lower for less than two days, and so most analysts would probably place the 54-month cycle trough in March 2009.

But my point is that there was a very neutral cycle shape that developed either before or after the 54-month cycle trough. Here it was a 20-week cycle that had a neutral shape. That neutral cycle was either an inauspicious start to a very bullish move, or an early turn which robbed the bear of the last few months of “plunge” into the trough.

The NASDAQ example

And so I cannot help wondering whether we are seeing something similar in the Euro right now, particularly considering that big troughs have formed in the GBPUSD and Crude Oil.

I would love to hear what you think.

 

 


About David Hickson

I have been trading for over 20 years, but only had any success after discovering Hurst's cyclic principles. Unable to find any software to speed up the analysis process I created Sentient Trader software, which now pretty much does all the analysis for me. I am a film maker and a TV director, but nowadays I mostly provide consultation services to professional traders and fund managers, helping them to integrate Hurst analysis into their trading. I'm South African and live with my family in Italy.


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10 thoughts on “The Struggling Euro

  • huub de groot

    And assuming there are 2:1 harmonic ratios 18Y-9Y-54mo on a long time scale of 30 years, the troughs in the 18Y FLD nicely mark the 9y troughs in the data and the troughs in the 9y FLD nicely mark the troughs of the 54mo cycle…

  • huub de groot

    The last 9y FLD trough (highligted in the graph below) 6 months ago then indicates (I think) that a quenched 54 mo trough in the data may be behind us already, indicative of a steep descent without mid channel pause of any significance. From a theoretical perspective there is then little upswing to be expected for the time being.

    • huub de groot

      Let me add a brief statement explaining “the 54 mo may have been already”, as it came up in last monday’s podcast.

      An analysis with the frequency model parameters of William Randall is shown in the graph. That is 50 mo and 18 mo. The 18 mo is dominant, but it reduces a bit now to 17.73 mo, as the lower time-frequency graph shows.

      The 50 mo band filter shows, however, an interesting behaviour. The filters I use are the Ehler filters, and they have a (grey) signal line to correct for the inevitable time lag in digital filtering. When the grey line crosses the coloured line, this is where the minima and maxima are indicated to occur. Then a rather convincing crossing makes it looks as if the latest 50 mo trough has been mid 2012 to mid 2013. With these filters there are not necessarily synchronized peaks. When I narrow the band width of the 50 mo and 18 mo a nest occurs in July 2013.

    • huub de groot

      And here is the ST analysis with some 20w fld pattern projection boxes.
      It needs pinning to work around the fundamental interactions, but I do get closed diamonds…..

    • Huub de Groot

      And this is another view, from MT: the convolution fireworks tuned to the 54 mo nominal cycle.

      The starts of the green flares is where the troughs are found, and the last one was after mid 2012.

      There is no (green) sign yet of an early new trough.

      There is, however, a nice red flare starting in the first half of 2014. It has not yet grown to full potential, but red flares are tops, this top is early, early top means downside potential from the trend.

      Other than that there is confirmation of an 18mo dominant cycle with superb signal to noise of almost 9 from the corona dashboard.

      Enjoy!

  • alain

    All channels (1 Year – brown, 6 Months – ocre , 6 Weeks blue ) are downtrending.

    Underlying trend 1 Year is downtrending (summ of all cycles of duration longer than 12 months)

  • alain

    Resistance Curve based on volume calculated according to Paul Levine MIDAS Methodology.

    Displaced curves based on GANN Octaves