The overall weakness of the US Dollar continues to dominate much of the FX markets at this stage. Despite a slight uptick in USDJPY this afternoon, the longer-term picture is starting to suggest more of the same, particularly against a much stronger Euro.
In September, Goldman Sachs mentioned a 12-month price target of 1.25 for EURUSD, stating it could reach this level sooner-than-expected if Biden secures the US presidency and a Covid vaccine becomes available. Since then, we’ve witnessed both of these events come to pass, and although the 1.25 region remains untouched, the EURUSD pair continues to rise steadily. Incidentally, Goldman has since revised their estimate to the 1.28 level.
Looking at the point and figure chart above, we see a strong demand for the Euro as it maintains the bullish support line. These short consolidative periods end with thrusts of impulsive moves higher that appear to be gathering momentum along with this upward trend.There are three potential upside targets shown, all using a vertical box count method. These targets are 1.2175, 1.28, and 1.3075, the first of which has already been reached. It is interesting to see how close these figures are to Goldman’s analysis.
Should the Dollar mount a recovery phase, the psychological barrier at the 1.20 level may provide adequate support for the short-term. Still, any moves below this region would put pressure on the current bullish support line.
Note: Click on charts to enlarge.
By Adam Taylor CTEe
Sources: Go Markets, Meta Trader 5, TradingView, Bloomberg
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