The greatest trade in 2023 that keeps on giving

The currency market is known for its increased uncertainty and uncorrelated market moves. In other words, it is the first market to react to news and events happening in the world, and often, it does it so fast that it catches most traders by surprise.

But sometimes, trending conditions may last in the currency market, too. For example, the EUR/JPY bullish breakout from earlier this year and the trend that followed.  

EUR/JPY started 2023 at 138 and now trades above 158. This is a stunning 20 big figures (i.e., one big figure equals 100 pips points) move by all accounts.

Such strong rallies happen when the market participants are taken by surprise. In this case, it is not only the USD/JPY strength but also the euro’s resilience that sent the cross pair higher.

Moreover, looking at the technical picture, there is room for further advances.  

One needs to look at the bigger picture to understand what happens with the EUR/JPY cross fully. More precisely, the rally that started from the 2020 lows is just the beginning of an even ample move.

It is worth mentioning here that in 2020, the EUR/JPY cross traded below 116 before bouncing. Therefore, in merely three years, the market rallied to over 158.

But there is scope for some more, as indicated by the running correction below.

A running correction in a rising market means the 2nd wave ends above the 1st wave’s ending point. Running corrections are often complex ones. In this case, the structure a-b-c-x-a-b-c-d-e in blue shows the running correction as a double combination completing the 2nd wave.

The bullish breakout mentioned at the start of this article happened in 2023 when EUR/JPY broke above the b-d trendline. That movement marked the start of the 3rd wave in black, one that should exceed all the previous moves by far – both in distance traveled and in speed.

Most recently, EUR/JPY bounced from dynamic support given by the upper edge of the rising channel. It is of utmost importance that the market should hold above the channel as this is a requirement for the price action following a running correction.

In short, the EUR/JPY rally did not end – it barely began in 2023.

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