The dollar bearish sentiment gets back on stage as President Trump prepares to sign the new stimulus package. EURUSD resumes gains. The following 28 December EURUSD Elliott wave analysis shares some technical insights.
December 28, 2020 / AtoZ Markets – The last week of the year started with a risk-on sentiment as the fresh $900 billion US stimulus package gets the final approval of the President. The dollar index fell back to 90 and sets to decline further. The Euro-dollar is back above 1.22 and could hit 1.23 in the early days of 2021. Meanwhile, volatility should drop below what we are used to as banks, institutions, businesses, trading houses and government bodies close for the year. In all, the dollar is doomed for more beating in the medium term. EURUSD therefore has the potential to jump above 1.24 as the bullish trend since March last longer. However, as shown below, we are closing to a high which should precede a major bearish correction.
As we head into the early weeks of 2021, risk sentiments will remain the major market drivers. How will the world worry about the new strain of Covid? Will the vaccines be able to cope and how fast will they circulate across countries? Will there be sustenance afterwards or they will come with dovish side-effects? The market will shift from vaccines production to their real effects on global Covid numbers. Aside from this, will the banks continue to hold the current low interest rates if the vaccines are effective? US Fed said it would only consider that in 2023. What about the ECB jawboning the Euro in 2021 by taking the other side of the US Fed?
Spotlight will also be on economic figures to measure the recoveries. Aside from this, traders and investors might worry about US politics as President Biden takes over in January. What about fresh risks from geopolitical tensions. These are some of the risk drivers traders will have to worry about. At the moment, the Dollar continues to prove to be a strong risk-off FX and could force further EURUSD surge.
28 December EURUSD Elliott wave analysis
In the 28 December EURUSD Elliott wave analysis chart above, the bullish impulse wave run is completing the 5th wave. Wave 5 is still in motion. By projection, wave 5 could hit 1.245 (61.8% Fibonacci projection level). The chart below shows the sub-wave development from 1.1605 on the lower time frame.
Since December 18, the price has gone sideways to complete a triangle minuette wave (iv) (in black). The current breakout suggests that we would see a break above 1.2275. We can then count sub-minuette waves (in blue) of wave (v). Traders should therefore expect further rallies toward 1.245.