EURAUD: 06/23/2017

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After hours of exchanging ideas with the developer of TimeSeriesSCC we have both come to the conclusion that the auto-scaling range in the SCC radar can be narrowed down by comparing the periodogram result of the current cyclical circumstance with the region where the similar cyclical circumstance is expected to be. We can then obtain a ratio of corresponding cycles and that would be the mean ratio of scale. The mean gives us statistical guidance on what to expect the scale to be between the current cyclical circumstance and the similar cyclical circumstance. Some leeway will have to be given which is why I have purposed to the developer a 0.125+/- scale about the mean in the correct SCC search region will lead to an accurate computer generated aid in determining the SCC and hence a projection line. The mean in the example above is about 0.98 between corresponding cycles. This means that we will have an auto-scaling range of 0.85-1.1 in the SCC radar. This statistical guidance is of great aid in filtering out the irrelevant results exposed by the SCC radar due to coincidental correlation. The SCC search region can also be approximately obtained via the periodogram as well. The generalized periodogram shows a prominent peak at approximately 7.52 years with the second harmonic satisfied as visible on the picture below. These happen to be the nominal 9 year or 108 months and the nominal 54 month.

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The picture above guides us to expect the SCC to be approximately 15 years from the initial point of the current cyclical circumstance which was AUG of 2012 in this particular example. Let us take a look at the results of the SCC radar with this particular auto-scaling range and SCC search region.

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As visible above the most correlated time period to the most recent (AUG 2012 going forward) is the period from 1997 which is precisely what the periodogram suggested where the SCC should be from an 18 year cycle perspective. A result that is certainly rewarding after the many hours of thought and code that has been put into the SCC radar by the developer and I.

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Finally, in terms of the future course of prices for the EURAUD the AUD seems to be in a more favorable position for quite sometime into the future (refer dates on the chart [British format]) even after an advance similar to that experienced in 2008 occurs we still have reason to believe that the overall picture looks bearish for the EUR in terms of the AUD. For Elliott wave enthusiast the structure from the 2008 peak looks like an ABC decline with an intervening 3 wave rally for the wave B. A simple beauty to say the least!

Ahmed

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