EURUSD approaches 1.23 on Monday as the Dollar falls lower. The following 4 January EURUSD Elliott wave analysis shares some technical insights.
January 04, 2020 / AtoZ Markets – The Euro-dollar currency pair flows in the opposite direction of the dollar index (DXY). DXY continues to hit new lows as risk-on persists. On Monday, Wallstreet’s major stock indices hit fresh record highs despite rising Covid-19 cases and concerns about the new variants of the virus. The safe-haven dollar falls in the other direction. Thus, on Monday, major FX gain over the buck. This will most likely continue this week. However, traders should pay attention to major risk drivers, Wednesday’s FOMC and Friday’s US employment data (NFP).
EURUSD is trading at 1.23 early on Monday after rising over 80 Pips. Much of this gain came in the early hours of the London session. With this surge, the market has recovered from the last Friday’s loss. At the intraday level, a surge above 1.231 is very much likely as the market prepares for 1.24 or even higher. The dollar will most likely continue the bearish run.
The risk drivers this week remain Covid/Vaccines, US Politics – Biden’s inauguration amid Trump’s upset threat, FOMC and Friday’s US employment reports. So far, there are reports of rising cases in the US, UK, Australia and many other countries. The rate of vaccine distribution is however much slower. The market seems to have priced in all that as vaccines and stimulus offset the virus effect. However, new headlines might emerge to trigger fresh moves.
4 January EURUSD Elliott wave analysis
Just as we have been discussing in recent updates, the bullish development on the EURUSD chart is not yet over. However, the bullish phase since March 2020 is in the last stage. Wave (5) could extend to the 61.8% Fibonacci projection of wave (1) to (3) from (4) after surpassing the equivalent 38.2% at 1.2069 in early December. It’s until we confirm the end of wave (5) and the price shows significant weakness, that we can ascertain to a reasonable degree, the start of the equivalent bearish phase. Therefore, it’s important to monitor the development of wave (5) as the market progresses.
EURUSD Elliott wave analysis – intraday outlook
Intermediate wave (5) started at 1.1605 and is developing into an impulse wave pattern. Sub-waves 1-3 (minor degree) seem to have completed with wave 4 ending at 1.213. 1.213 will therefore stand as a minor intraday support level for further gains. We can say wave 5 of (5) has started at 1.213. The breakout resistance for the continuation of this wave formation is at 1.2310. A break above should lead to more rallies toward 1.25 to complete wave 5 of (5). We will then see what happens afterward – the start of the bearish phase or extended internal bullish waves. An update will be posted here within the week.