AUSSIE CYCLE TRADER - MONTHLY NEWSLETTER FOR JANUARY 2023
This month we assess how bullish the ASX200 could be. The AUDUSD continues to give mixed signals... what are our cycles telling us? Where will the likely reversal or breakout take place?
Welcome to a new year. 2022 will be a good one to put behind us. With many bear markets around the world, increased volatility and unpredictability certainly made our lives as traders harder! Fortunately, astrological outlook for 2023 promises ‘smoother sailing’. There are no significant aspects in the powerful, slow-moving outer planets, like what we saw with Saturn-Uranus square in 2021. With a bit of luck, we could. see some market tailwinds in the months ahead.
This month saw a pull back in the XJO. But with the longer term bullish outlook a big question is how high the crest of the 4-year cycle will go. The AUDUSD pair ‘held’ during December. There are some signs of strength in the short term, will they follow through or weaken, rolling over to new lows?
Let’s dive in and have a look.
Jonathan R.
PS. These newsletters constantly reference various cycle lengths and characteristics. Cycle theory is assumed knowledge, and to a lesser degree, geocosmics. For more background info on cycles and geocosmics, see this link.
Disclaimer:
All information provided is based on analysis of the markets using publicly available information and data. It is provided for your own review and study with no consideration of your personal circumstances. Trading markets always involves risk. No guarantees are made. You are solely responsible for any transactions you initiate in the market.
Review of the AUDUSD currency pair for January 2023
The AUDUSD hasn’t moved a lot since last month. After closing at $0.6767 on the 9th of December, we saw a quick rally to $0.6893 – just 16 points short of our price projection at $0.6909. That price level was based on 50% of the move from the prior 23 month high to the current 47 week low. So our price criteria has been fulfilled and the market has seen resistance around that level over the last 4 weeks. What’s next?
Below we’ll examine whether the market is readying itself for a fresh campaign to the upside, or if another intermediate high is forming.
AUDUSD Long Term Cycles
The AUD/USD has a 17-year cycle, with 2-3 sub-cycles of 6.8 years (+/- 10 months)
For the 2-phase variation - cycles have tended to expand out to 7.5 years or longer.
For the 3-phase variation - cycles have tended to be 6-7 years, with a contracted 3rd phase of 3-4 yrs.
We are in month 34 of the current 6.8-year cycle which started in March 2020. There was an 11-month rally to the peak of $0.8007 in Feb 2021.
The next significant long-term cycle due is the 46-month cycle. The orb commences in June 2023 so we will be looking for a long-term trough after this date.
The monthly chart gives mixed signals on how the 46-month cycle should end. Until the low of $0.5508 is taken out, the cycle is considered bullish or neutral. A classic bull cycle would have the crest in the second half of the cycle (ie ‘right translation’), but so far this is not unfolding. Since Feb 2021, the trend has been down.
With the shorter moving average above the longer, and price below both, this chart is considered ‘neutral’.
For the AUD, ideally the 46-month cycle completes well above the initial low. That would leave room for a bullish 2nd phase to the 6.8-year cycle. It would also mean that long term connotations of having bearish 6.8 year and 17-year cycles are avoided for now.
AUDUSD Intermediate Cycles
The 46-month cycle (+/- 7months) is the half cycle to the 6.8 year cycle.
The 46-month cycle normally forms 2 phases of 23 months (+/- 4 months)
The 23-month cycle normally forms 2 phases of 47 Weeks (+/- 10 weeks)
We are now 12 weeks into the new 47-week cycle which bottomed on 13 October at $0.6157. The market rallied strongly back into the downwards channel and is now trading close to a resistance zone.
There is a strong possibility that the crest of the 47-week cycle could culminate around this level.
Given that the 23-month cycle turned bearish when it’s starting point low of $0.6968 was taken out in May 2022, we expect the bearish trend to continue. The final low should fall below $0.6157 (the lowest point in the current cycle), between September 2023 and April 2024. As the price is expected to fall to new lows, we should anticipate the 47-week cycle also turning bearish.
The resistance around $0.69 are a confluence of resistance levels – 50% retracement from the downward move from the 23-month high to the 47-week low (being $0.6909), the start of the 23-month cycle (ie. Support becoming resistance at $0.6968), and the resistance provided by the upper line of the downward channel.
From last month: There is still an outside chance that the October 14 low is an expansion of the 23-month cycle, or a change to the phasing of the 6.8 year cycle. Despite our bearish outlook, this possibility still exists. Last month we identified a ‘head and shoulders’ pattern on the daily chart, a bullish pattern. We can now observe a larger one forming on the weekly chart! The neckline to this pattern is basically the upper channel line.
If we see an upside breakout through the top of the downward channel with strong closes into our moving average areas, be prepared to change direction and go long. The upward price projection under this scenario is around the $0.79 area. We will re-do both the cycle analysis and price targets next month if this scenario unfolds.