EURUSD ended the last week bullish as the dollar weakened further. What could happen next? The following 13 October EURUSD Elliott wave analysis shares some technical insights.
October 13, 2020 / AtoZ Markets – The dollar remains on the back foot as the US election draws nearer. The US politics remains a major concern for traders as disagreement ensues between the White House and the US legislature concerning the size of the next stimulus package. EURUSD started the week bullish, with a surge above 1.18. The currency pair has maintained a firm bullish momentum. Further rallies above the 1.12 top is now very much likely, although a minor intraday recovery down to 1.173-1.175 could emerge. EURUSD technical analysis also support further rallies.
The dollar has primarily driven the Forex majors in recent months. The ECB has already soften fears concerning cutting down the EUR strength. Therefore, traders can focus on what happen around the dollar. The market has big things to worry about.
US Politics and the USD
First is the US election. It now seems the stock market has begun to favor a Biden win which in contrast, could drag the dollar down. Biden’s lead at major polls is currently being taken serious by the market as the Democrats promised a bigger stimulus package if elected and a stricter regulation. This is despite Trump’s tag as the man for the markets. The stock markets have therefore close to completing recoveries of the September slump despite the uncertainties surrounding the much anticipated US stimulus package.
Talking about the stimulus package, market worries are in two phases – when and how much? The legislature have already turned down the White house’s near $1.8 trillion package, saying it was below their expectations. Earlier, the president has extended the timing till after election. Does the market now see Trump as ‘anti-markets’ and by effect ‘pro-dollar’? Events leading to the election will provide more clues which are capable of driving the markets. Meanwhile, the dollar continues to move against the stock market. However, the correlation should be watched closely as events unfold.
13 October EURUSD Elliott wave analysis
From the 13 October EURUSD Elliott wave perspective, euro-dollar remains in the bullish trend. In the last update, we mentioned a bullish impulse wave trend from 1.062 with the chart below.
On 25 September, the 4th wave ended at 1.161. Ever since, the 5th wave is growing gradually. However, it seems the first sub-wave of the 5th wave has not yet completed as the new chart below shows.
Wave 1 of (5) has probably ended with a diagonal pattern. This will be confirmed if the current dip continues to 1.173-1.175 to complete what should be wave 2. Afterwards, wave 3 of (5) should emerge above 1.2. This will provide fresh opportunities for the bulls to push the trend further upside. If the price moves along this forecast, we should see wave (5) at 1.2135 or 1.2297 important Fibonacci projection levels.