USD/CHF Analysis

USD/CHF – Wave b from 1.2298 should be limited to 1.0000.

The greenback finally resumed medium term decline this week, broke below support at 1.0170 and hit a fresh 2009 low of 1.0119 yesterday, suggesting the (c) leg of larger degree wave b is still in progress and weakness towards 1.0011-39 (previous chart support and 100% projection of (a) leg at 1.0039) cannot be ruled out but reckon psychological support at 1.0000 should limit downside and 0.9900 should hold, bring rebound later this month.

Our preferred count is that early selloff to 0.9630 is an end of the larger degree wave (C) and major correction is unfolding from there with a leg of a larger degree wave A ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b is now in progress in the form of an (a)-(b)-(c) with (a): 1.0370, (b): 1.1967, (c) is still under way (wave i: 1.1160 , wave ii: 1.1742, wave iii is unfolding) for fall to aforesaid downside targets.

On the upside, whilst recovery to 1.0300 cannot be ruled out, only break of resistance at 1.0453 would signal a temporary low is possibly been formed and then correction to 1.0563 would follow. Looking ahead, only break of 1.0885 resistance would confirm and bring test of 1.0935. A daily close above this level would signal the (c) wave has ended and bring test of 1.1026, however, only a break of this level would confirm low has finally been formed and rise towards 1.1290/00 and then the trendline resistance at 1.1400 would follow.

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) which ended at 0.9630 (Mar 2008). Under this count, a major correction is now in progress with a leg of larger degree A ended at 1.2298 and b leg is still in progress but downside is likely to be limited to 1.0000/11 and bring c leg rebound of A in Q4. In the event dollar drops below1.0000, this would suggest only wave III (our alternate count) has ended at 0.9630, then the final wave V of (C) would extend weakness to 0.9500.