Euro gets more pressurized as positive risk sentiments drive the safe-haven dollar further upside. The following 1 February EURUSD Elliott wave analysis shares some technical insights.
Market risk remains to the downside this week with the Euro being pressured across the board. The dollar index resumes further rallies just a few hours before the New York opening. EURUSD bears are pressing toward the 1.205 support level. With a breach below the level coming thicker, a test of the 1.2 psychological level is high on the cards.
Market Risk Factors
Market participants will be looking forward to the PMIs from the Eurozone and US later this week before Friday’s US job data. However, the effect of general risk sentiment on the dollar should drive this currency pair in the opposite direction of the greenback. Aside from this, the Euro-zone has its own challenges. Predictions that the recovery in the zone will be slower than the US and GB is loud with slower reaction to curtail Covid the main cause.
At the market opening this week, a downbeat risk tone drove risk assets further downside after bearish gaps. However, all of the overnight losses have been recovered. Covid19 vaccination is improving at an increasing rate amid a lower weekly spread rate. This is positive to the overall risk tone. Meanwhile, the market will also watch the implementation of President Biden’s $1.9 trillion stimulus and the current pressure on the Wallstreet big guns. Those are the negatives to consider. However, EUR might still suffer from lockdown extension in some parts of Europe, disappointing EU data and political struggles. Technically, as the chart below shows, EURUSD might decline to prices around 1.2 until a much better risk tone enforces a strong bounce.
1 February EURUSD Elliott wave analysis
From the last update, we reckoned the development of wave 4 from 1.2355. We will continue to hold on to this long-term bullish trend until a breach below 1.192 happens. At the end of wave 4, wave 5 should push the market to 1.245 at least. However, wave 4 is bigger and taking a longer time than it used to. It might be the start of a larger bearish correction with the likelihood that the long-term impulse wave pattern has already ended at 1.2355 instead of the 1.245 target. That’s the alternative scenario.
In either case, the decline from 1.2355 is corrective – a double zigzag pattern within a falling channel. The price is knocking at 1.205 support. A decline to 1.20-1.195 is very much likely in the short term. Afterward, a surge to 1.22 should follow as part of a larger bearish correction or a complete surge to 1.245 for wave 5.