Many market commentators are surprised at the recent performance of the EUR against the USD. Many of them state that the recent advance is simply a corrective pull back and new lows can be expected. This kind of psychology is typical at the initial kick off of a new bull market. In this post I will present evidence to the contrary of popular opinion and by God’s will you will end this article believing that the EUR is not only bullish but has formed the base for a move that is likely to last over a decade into the future. The chart above presents my phasing analysis on the EURUSD currency pair. I have taken a look at the previous 18 year cycle. I say previous because I believe that the 18 year cycle has terminated and we have begun a new one as of earlier this year. The structure could be confusing to many Hurst analysts considering the sudden shrinkage of the 54 month cycle after the 2010 low with the Greek riots and protests. I have been holding this interpretation for quite some time and I have finally gotten the confirmation that the lows indeed have been realized. Speculators are advised to watch this market very closely for purchases on any significant pull back that the EUR goes through since the advance is likely to be parabolic rather than a simple 3 steps forward and 2 steps back pattern. The reason why I state parabolic is the larger perspective of things. We have reason to believe that the EUR is on the verge of a trend cycle (second 18 year cycle within the 54 year cycle) which is likely to make new all time highs and experience significant translation to the right. Let us now take a look at the projection of the upcoming, or I should say current, 54 month wave.
The chart above presents my forecast of the current 54 month cycle. The corrective pull backs certainly seem of little significance other than to add to our long positions going forward. Personally I have been long the EUR since mid April and I am still holding until late July when the peak is expected to be realized along with the 18 month cycle trough in terms of the equity market. Considering the recent negative correlation between equities and the EUR such synchronous dates flatters the scale used for the projection in both markets. It is not too late to long at this current point in time, but those who wish to wait for a pull back there seems be a high likelihood of a low in late October of this year but of course the upcoming July highs need to be surpassed in order to confirm the establishment of a higher swing low.
Something of significant importance occurred last week in the EURUSD and that is the breach of the 18 month FLD. If you study the phasing on the first chart above you will realize that we were in the final 18 month wave of the final 54 month wave of the second 9 year wave of the previous 18 year cycle. This is why I have the 18 month FLD presented in the chart above considering a break of which would not only confirm a turn of the 18 month wave or the 54 month wave or even the 9 year wave but a turn of the 18 year wave due to the cyclical structure that we happened to be under. Speculators can use this recent break as an action signal to trigger longs although some would prefer to wait for the corrective pull back expected in August and September as the equity markets have a reflationary bounce.
The chart above presents the 54 month cycle FLD along with recent prices on the EURUSD. It is important to note that the median price has not surpassed this FLD yet and hence confirmation of a 54 month cycle low is yet to be observed. The reason why I presented this chart is to demonstrate J.M.Hurst’s genius in utilizing the FLD to determine potential times of cycle troughs on which the FLD is based. The idea is that a peak in the FLD translates to a trough in price and vise versa. Presented above are some of the accurate calls made by the FLD. It is important to note that the final low came late (well after the peak in the FLD) suggesting that it was long overdue. The trough was later confirmed by a break of the 18 month FLD after the final 18 month wave of the previous 54 month cycle.
Last but not least, I wanted to point out the significant divergence witnessed on the weekly chart of the EURUSD. Such divergence on a weekly is usually typical of a significant multi year advance on the underlying. It is also import to note that the two troughs which both occurred in March could be classified as a somewhat odd double bottom. Fans of chart patterns can utilize a break of the upper boundary of the pattern as an action signal to trigger longs in this currency pair.
In conclusion, I hope the evidence presented to you here is sound enough for you to be a believer that this is not simply a corrective pull back in the USD and new highs (lows on the EURUSD) are soon to be realized. This trough is certainly going to be a historic one and a move similar to that that occurred in the 1970s is right around the corner.