Risk-on flow dominates the market this week. Safe havens like the dollar are severely beaten while equities and commodities maintain an upbeat mood. Let’s take a look at the technical forecast of the dollar and the major FX pairs. Will the dollar drag lower?

The dollar resumed the long-term bearish trend on Friday and has not looked back this week. The general market mood was quite gloomy in January, as a result of concerns about the new virus strains, US political uncertainties and Redditers’ assaults on Wallstreet. However, the positives which include vaccine hopes, optimistic views from the banks and a fresh US stimulus package have been able to prevent a wild fall on riskier assets. While the negatives uplift the safe-haven dollar by over 2.3% in January and thus gave it a massive advantage over its peers, the positives are back early in February. The dollar index has plunged 1.4% since Friday as the chart below shows.

DXY long-term technical overview

From the Elliott wave perspective, the dollar index bearish run from 103 in March 2020, is evolving into a clear impulse wave pattern. With this, we could be able to track the switch from trend to correction and vice versa along the way. As the chart above shows, the bearish impulse wave is completing the last leg – wave (5). Meanwhile wave (5), in its own way, is also completing an impulse wave. Wave 4 of (5) ended at 91.60 in January. By projection, this bearish run should continue so as to complete wave 5 of (5) at 88.13-87.89 at least. The likelihood of this happening is very high if we consider the current market sentiment and the expected risk-tone in this quarter of the year. However, traders should continue to track the underlying market risk sentiment. Risk-on will continue to pressure the greenback.

The DXY intraday chart above shows the clear bearish trend from 91.6 supporting the earlier forecasts. Five-wave macro-dip is painting another impulse wave picture. The current correction looks sideways with a triangle pattern. An eventual break below should lead to dips below 90.24 and down to 89.95 and 89.65 in the short-term. However, if the current corrective bounce extends, we could see a hit of 90.6 before the expected dip.

EURUSD intraday technical outlook

Euro-dollar mirrors the movement of the dollar index. A bullish resurgence from 1.195 could hit 1.22 to complete the impulse wave pattern. The current dip might however hit prices around 1.211 before the next surge. With the dollar index expected to plunge further, EURUSD should hit 1.22 at least. EURUSD’s long-term outlook remains bullish toward 1.245.

USDJPY intraday technical outlook

Despite the Yen being a safe-haven FX, the USDJPY pair has surrendered to the dollar bears. The currency pair hit our 105.5 bullish corrective target. With the new top at 105.75, we should see the next short-term low at 104 at least. The current hesitation is the 4th sub-wave and could complete a triangle structure with the top at 104.85 or even a zigzag pattern to 105 before the expected dip toward 104. However, the former is more preferred especially if the current pressure persists below 104.85. Therefore, in most likely cases, USDJPY’s short-term outlook remains to the downside with the target around 104.

AUDUSD intraday technical outlook

The current risk-on tone supports the high-beta FX like Aussie and NZD. Aussie maintains its lead especially against safe-havens like the Dollar, Yen and Swissy. AUDUSD unsurprisingly is maintaining a bullish impulse wave pattern from 0.7563. Wave iv seems to have ended at 0.7712. Further surge to 0.7785 and 0.783 should follow. Therefore, the current minor dip could provide fresh opportunities for buyers at 0.7733-0.7728 intraday Fib support zone.

Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This communication has been prepared based upon information, including market prices, data, and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. Trading CFDs involve risk and can result in loss of capital.

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