Euro to trend and Yen to stay rangebound
The forecasts we offered in early March for the Euro and the Yen have worked fairly well, although the bounces got started a few days later than we expected. The Euro is still following the medium-term bearish plan that was shown here, and for structural reasons the recent strong Yen rally causes us to expect a lengthy sideways move during the rest of 2023.
The Euro's climb from February appears corrective even though it has pushed almost to the limit of where a corrective second wave can reach. A daily close above 1.1054 would prompt us to re-evaluate the wave count and probably discard what is currently the primary scenario (shown with black labels and grey path), although it would leave the alternative (blue) scenario provisionally intact.
If the Euro declines from near its current area, then we would expect to see price climb down the rungs of the ladder shown in the green-shaded intraday portion of the chart below. Ideally a break of each support will lead to a test of the next one, and any small bounces will be capped by the previously broken supports. Keep in mind that another small swing high is still possible as long as 1.0880 holds as support.
The alternative scenario – in which the Euro would make a higher low compared to last year and then would continue rising – remains a possibility until price pushes beneath the middle series of supports shown on the daily portion of the chart.
On the other hand if the primary scenario is working, then any bounce from that middle zone of supports should be shallow and the Euro should achieve a new low probably around July/August or possibly in autumn.
The Yen has provided new clues about where it's headed, so we have updated the Elliott wave count slightly. In our previous post we suggested that the climb from October into January represented either the entirety of a corrective fourth wave or merely the first part of that wave. Now we're more confident of the latter.
The strong rally from March 9 makes it difficult to find a downward impulse that would be the start of an escape move out of a fourth wave... and that suggests the market is still in the fourth wave. We have drawn what we believe is the most likely "triangle" path on the daily chart below, although the correction could produce a simpler a-b-c form instead. Either type of correction favours traders who are skilled at working in range-bound markets.
Eventually the Yen should test areas beneath its 2022 low, and we have 0.006396 as a preliminary target for the ultimate low.
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