January 22, 2020 / AtoZ Markets - The dollar continues to fall across the board. Risk-on dominates earlier this week following positive expectation of more stimulus from the Biden administration. The DXY is close to hitting 90 a few hours before the market opened on Friday. Meanwhile, for the euro-dollar, we are about to end the week very bullish week. Political concern in Italy and a worsening covid situation in the zone kept the euro pressured across the major FX.
ECB mixed outlook
Meanwhile, on Thursday, as widely expected, the ECB kept rates unchanged. At the follow-up press conference, President Lagarde said the policymakers are under less pressure since the turn of the year. The Brexit deal, vaccine roll-out and the expected recovery fund have ignited optimism. However, she warned that the growth outlook is further tilted to the downside but better than what it was during the December monetary policy meeting. Although her statements were mixed, the tone was not as dovish as the market had expected.
EURUSD resisting rally above 1.217
EURUSD continued to add to gains, although slowly. Prior to ECB, the pair met resistance at 1.217. Hours after, it jumped above 1.217 and remained around there during the Asian session into the London market. As the week ends today, traders' eyes will be on the eurozone PMIs for more action. Aside from the PMIs, other macros today are very soft. Therefore, activities around the dollar will be very important for traders. The current risk tone is mixed and could return either way. In addition, Covid resurgence in the Eurozone is a cause for concern as the EUR may be pressured again if the reluctance to stay above 1.217 persists.
22 January EURUSD Elliott wave analysis
We will maintain the Elliott wave outlook we had in the last update. The minor degree 4th wave (wave 4) ended at 1.205 on 18 January. Wave 5 should proceed from there to our first medium-term target at 1.245. However, if the dip from 1.2355 continues below 1.205 toward 1.2, we will have to re-consider our medium-term and long-term technical stance.
If the above 22 January EURUSD Elliott wave analysis chart is correct, we won't see a return to the 1.2075 intraday support any time soon. A minor decline to 1.204-1.202 might happen, but eventually, the currency pair should resume the long-term bullish trend above 1.225 and 1.2355 as we count a bullish impulse wave 5. This will happen especially if the dollar continues to plummet.