Currencies on a strong downward course
Our late-January forecasts for currency pairs performed well, and there were some nice trades to be caught after the Euro and the British Pound fell through their designated confirmation levels. In this post we refine the Euro forecast and introduce a near-term map for the Yen.
We believe the Euro is pushing for a new low this year in relation to the Dollar, although we encourage readers to review the alternative medium-term bullish scenario mentioned in the previous post. Price has not yet reached the zone where the market will decide between the two paths.
At the moment, Euro futures appear to have completed an impulsive (five-wave) move down from the early February high, followed by an upward retracement that seems to have ended with Fed Chair Powell's address on Tuesday. Next we'd like to see price move beneath its recent range to test the middle area of supports shown on the 240-minute portion of the chart.
If price has begun downward wave (iii) as we believe, then the moves in coming days should be strong. Ideally we'd like to see Euro futures test the zone of 1.0202 to 1.0182 and then the zone from 1.0041 to 0.9959. Lower supports at 0.9862 and 0.9738 could come into play during the current move or possibly later in a subsequent downward wave (v).
Our main bigger-picture target zone for the Euro waits near 0.9425 or the zone from 0.9008 to 0.8952, with possible lower targets marked.
The Yen presents a more ambiguous Elliott wave count than the Euro, but we think it can also break lower. During the next few weeks there should be opportunities for modest trades in sub-wave (V) of the downward impulsive structure that began in early February at the lower high marked as wave [II] or [B]. If 0.00729 fails as support, then we favour a trip down to at least 0.00723, with better targets near 0.00712 or 0.00705.
We expect the Yen eventually to reach beneath its 2022 low, but there are ways the market could delay that low until later this year or even next year. Alternatively price could take a more direct path and reach a new low within a few months. We will continue monitoring the structure as it develops.
Trading On The Mark uses technical analysis to identify the trends and turns in highly traded markets for commodities, energy, currency, bonds and indices. Consider subscribing to our daily or intraday services!