EURUSD broke above 1.23 on Wednesday as the dollar return downside. The following 6 January EURUSD Elliott wave analysis shares some insights.
January 06, 2020 / AtoZ Markets – The dollar plunges further, unable to build on Monday’s gains. Reports that the Democrats are leading the Georgia runoff election is a boost for risk. It means President Biden could control the Senate which would encourage him to prepare a more robust package than the latest $900 billion in the face of the pandemic resurgence. Better risk sentiment puts pressure on the safe-haven dollar. Thus, EURUSD broke above 1.23 as the dollar fell across its major FX peers.
Later today, the FOMC will reveal its forecasts and plans for the economy in its first meeting this year. A hawkish FOMC could provide some short-term support for the Dollar. Otherwise, the buck should dig deeper. Also, an overly dovish FOMC could lead to a larger QE program in the face of the new strains of the virus discovered in the UK. Looking ahead, the FOMC today, employment data on Friday, Georgia election run-off, Covid19/vaccines and the January 20 new presidential inauguration will continue to dominate the headline and might influence the price of the Euro-dollar currency pair.
6 January EURUSD Elliott wave analysis
The currency pair started the year a bit above 1.22 and now advancing to a new multi-month high after breaking above the 1.23 psychological level. It is expected to mount toward 1.2450 as we have been saying in our recent Elliott wave technical analysis update. The 6 January Elliott wave analysis chart below shows the emergence of the sub-wave v (circled in red) of wave 5 in motion. Further rallies to 1.245 and the 1.2565 top is very much likely in the medium-term.
According to the Elliott wave theory, trends advance in five waves. Afterward, a corrective phase sub-divided in three waves would follow in the opposite direction. EURUSD is seen advancing in 5-waves since March. Wave 5, which should be the last one before the correction, started at 1.1605. From this level, we are counting a smaller degree impulse wave to complete wave 5. As the chart above shows, the break above 1.23 confirms the continuation of the minute wave (circled in red). Minute wave 5 (circled in red) should complete this move. Taking it slower, the 5th minor wave just completed its own sub-waves (i) and (ii) in blue. This wave development with all its sub-waves is confined within a narrow rising channel. This makes the start of the bearish phase a bit more predictable. A sharp break below the rising channel will make us weigh the option even before 1.245-1.25.