Although we continue to believe the major high in bonds was set in 2020, the downward pattern since that time might be complete. It is possible to count a five-wave (i)-(ii)-(iii)-(iv)-(v) impulsive move into the TLT support zone near 82.00.

If price remains above the 2023 low of 82.42, then a rally should take it to test initial resistance near 94.60 - 95.20, as drawn with the gray path. Moving above that level would serve as initial confirmation of the bounce scenario and would allow for a test of the higher areas shown: 102.50, 106.70 – 107.70, and our preferred upward target at 114.40. A stretch target for the move awaits near 118.90.

The most prominent alternative scenario is that bonds haven’t yet found a low. As shown with the red path, a break beneath 82.42 would allow for a run to the next support at 75.40 and might allow tests of lower supports. If price declines, then 65.10 appears the most likely area for the downward move to finish, but even a test of 55.10 would be possible.

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The last time we wrote about FXE, it was testing the upper boundary of the channel shown on the monthly chart below. Soon after that, price moved downward to test the quarter mark within the channel, whereupon it bounced beyond our expectations and escaped the channel’s main boundaries. The move was more bullish than we predicted, but we again believe a downward move is due soon. We think price can reach a new low within the next two to three years.

Our weekly chart shows that price is approaching Fibonacci-based resistance that is consistent with the Elliott wave count we’re using. The nearest resistance is quite close at 111.90, but the area near 113.90 – 114.50 looks like a better confluence of targets. When the upward move is complete, we expect a new downward impulsive structure to begin forming as a fifth wave within larger wave (C).

FXE could rise as high as 120.40 without invalidating the wave count. However, we note that the U.S. Dollar Index is currently testing an important support area. Our wave count for the Dollar suggests it should begin climbing soon, and that would be consistent with a falling Euro.

Note that the placement of (i)-(ii)-(iii)-(iv) labels on the smaller sub-waves is speculative right now. We believe sub-wave (iv) is complete, but a test near 104.00 could still happen before price goes on to reach the marked resistance areas.