EUR rebounded just a few hours before the New York session started on Tuesday. However, the pressure seems to be persistent. The following 26 January EURUSD Elliott wave analysis shares some technical insight.
January 26, 2020 / AtoZ Markets – At the start of this week, the dollar gained across the board. The buck surge persisted on Monday and into the early hours of the London session on Tuesday. Much of the dollar rise has been attributed to a pressured EUR. The EUR is the largest constituent of the dollar index thus the latter can influence the former although the reverse often is the case.
Policymakers are showing keen interest in the development of covid and vaccination. So far, over 66 million doses have been given out. Also, vaccination is showing positive results as weekly reported cases have been dropping since January 9. However, despite the optimistic covid outlook, data from the euro-zone has been sluggish as cases have spiked up in Spain and some other countries in the zone. As a result, most currencies are having the upper hand over the EUR.
In the last hours of the last week, EURUSD was oscillating between 1.216 and 1.219. It eventually broke downside on Monday and hit 1.2115. Earlier on Tuesday, the pair hit a lower level at 1.2107, shy of the 1.21 critical level. So far, the bearish move this week has tampered with last week’s optimism. We might therefore see EURUSD plummet further to 1.2. Spotlight will beam on the Wednesday FOMC.
26 EURUSD Elliott wave analysis
EURUSD has shed over 1.75% this month so far. In the last update, we reckoned that the rally from the January low of 1.2053 should ignite the long-term bullish trend toward the 1.245 target. From the Elliott wave perspective, we identified 1.2053 as the 4th minor wave – wave 4. Ideally, the surge from 1.2053 should complete a motive wave pattern – impulse or diagonal. However, the price completed a zigzag pattern instead as the chart below shows.
The fall that followed indicated that wave 4 could take one more leg to the downside. The current minor surge could be the final chance for the bulls to win the battle from 1.2107 and not from a much lower level around 1.2. Traders can watch for a break above the channel to reactive the near-term bullish sentiment toward 1.245. Then we can return wave 4 to 1.2053 low. On the other hand, a fall from below 1.216 to break below 1.21 should attract more bearish traction toward 1.20 psychological level. From there, we can then look for bullish reactions to confirm the end of wave 4.