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Aussie Dollar; New Zealand Dollar and Eurodollar - Cypher Patterns.

CMC Markets

Guest Post by DV 34

Something a little different... for those interested in pattern trading

It is called the Cypher Pattern and sometimes referred to as a Royal Canadian. Unfortunately I do not know who discovered this pattern so cannot credit them directly and probably explains why I had to draw these diagrams myself

The Pattern

Hopefully this explains the pattern structures clearly enough

Below are a few live examples I found in the FX market, like most patterns they appear on all timeframes

South Pacific Pairs... Bearish Cyphers

AUDUSD Daily

NZDUSD - Daily

Both of these pairs have bearish cypher patterns, although I think there is a small possibility that the NZD: USD pair could possibly form a shark pattern at the 88.6% or 113% retracement.

Copper - Monthly Triangle Breakout, Will $3.10 hold?

A couple of contributing factors to these pacific pair setups include:

  • The fact that these Cyphers complete at horizontal levels of support and resistance
  • Both are considered commodity currencies with NZ related to soft commodities and AU related to metals and fuels.
  • Long term the metals are breaking support levels as shown in the copper futures chart, (Affectionately known as Dr Copper) with the first monthly close outside of a long term monthly chart triangle from 2011

The Euro Pairs

EUR: AUD - Weekly. Bullish Cypher

EUR: AUD Daily – Bullish Cypher

On the weekly chart the EUR: AUD has a clear inverted head and shoulders pattern that looks like it may fail below the right shoulder, there is also a gap present post the Cyprus news a few weeks ago. If point B breaks then the Cypher could come into play with the second target closing this gap

EUR: USD Weekly – Bearish Gartley Pattern/ Typical Target Level

EUR: USD Weekly – Bullish Cypher (if H&S fails, point C)

I wrote about the Euro pairs mid February noting some higher timeframe key inflection points that you can read here.

Following on from the eurusd post the bearish gartley pattern is playing out as planned, but what is quite interesting is something that I learnt from Ric years ago regarding first targets for Gartley patterns.

This was using the mid point between points A-C as the first target, coincidentally this lines up perfectly with a tight Fibonacci cluster level forming a bullish cypher pattern on the weekly/ daily eurusd chart above.

This could offer a ‘stop (1st profit take) and reverse’ trade fading back to the 38.2 and 61.8% retracements of the C-D leg.

The two trades should be based on their own merits, but to remain valid the two Euro pairs must break below the point B which is where stops would be placed for the traders trading the inverted head and shoulders patterns.

Hope this helps

DV34


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