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

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

Cypher Pattern Diagram

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

AUDUSD - Daily. Bearish Cypher Pattern

NZDUSD – Daily

NZDUSD - Daily. Bearish Cypher Pattern

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?

Copper Cypher Pattern

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

EURAUD - Weekly. Bullish Cypher Pattern

EUR: AUD Daily – Bullish Cypher

EURAUD - Daily. Bullish Cypher Pattern

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

EURUSD - Weekly. Bearish Gartley

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

EURUSD - Weekly. Bullish Cypher

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

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Forex, Trading and tagged , , , , , , , . Bookmark the permalink.

4 Responses to Aussie Dollar; New Zealand Dollar and Eurodollar – Cypher Patterns.

  1. Andy P says:

    Interesting DV. I’m not much of a pattern trader – are there key similarities/differences to butterfly patterns?
    NB – it would be good if larger charts could be loaded, or add a short-hand annotation of clouds/indicators used on them (even zoomed in the oscillators are only just readable).
    Thanks for the post!

    • dv34 says:

      Thanks Andy, there are two primary types of harmonic patterns and they mainly focus on the B and C legs which are the most important in my own opinion. The garltey, crab, butterfly and bats all have the “C” points within X-A, the second type are either alternate patterns of the above or the shark or cypher patterns, these patterns have the “C” point above the point “A”. It is these B and C points that determine if you have a cluster at all and the retracements of these can tell you which levels hold more significance – hope this answers your first question.

    • dv34 says:

      Yes sorry about the charts, I took full screen screenshots on my 22″ screen but they obviously come out much smaller on here. The clouds/ indicators are simply exponential MA’s, 10, 20, 50ema + 200simple ma, the ribbons are simply shading between them – the oscillators are not really too important only a nice to have (+5%) and generally I use a StochRSI (Dtosc) but sometimes a vanilla MACD, RSI or Stochastic on the higher time frames – but thanks for your comment, I will note it in the future.

  2. gökmen says:

    cheers.very good observations

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