The modest rally in the Yen that we predicted in our February post has advanced nicely. Now price is approaching the area we have been watching for a downward turn. If the Elliott wave pattern continues to behave, the next decline should be fairly powerful and could test at or beneath the 2015 low.

As with our earlier posts, we show our Yen forecast using a chart for the CurrencyShares Japanese Yen Trust (NYSEARCA:FXY). The main resistance area in the near term includes the range from 90.10 to 91.60, based on Fibonacci-related measurement techniques. As the current rally approaches that area, it continues to look like sub-wave [c] of the three-wave corrective formation that began in 2015.

2017-04-23 FXY image 1

A contracting range in a three-wave corrective pattern is a little bit unusual. More often, the [c] wave extends beyond the [a] wave in whatever direction the correction goes. However, other factors suggest that wave [c] of the current pattern might come up short, as we have sketched on the chart.

Although we cannot rule out the possibility that wave [c] will continue beyond the resistance zone and beyond the 2016 high labeled as [a], the dominant cycle in the Yen/Dollar cross suggests there should be some kind of downward turn near the middle of 2017. The cycle has been very reliable for several years.

Another reason we favor a downward turn this year is that the U.S. Dollar appears to be nearing the end of its own sideways/downward correction. If the Dollar begins to rally during the next few months as we expect, that will put downward pressure on the Yen.

We expect to post a more detailed weekly chart on Twitter soon with additional support and resistance levels to watch. Meanwhile, check out the great value we’re offering this April for new subscribers to our daily and intraday analysis services. With savings ranging from 17% to 27%, this is an opportunity you won’t see again this year. See our subscription page for details.