USD/CHF – 0.9778
USD/CHF – Wave IV ended at 1.1730 and wave V has possibly ended at 0.7068
As the greenback dropped sharply after faltering below indicated previous resistance at 1.0108 and broke below previous support at 0.9813, confirming another leg of major decline from 1.0344 top is underway and bearishness is seen for further weakness to 0.9735-40, then 0.9675-80, however, near term oversold condition should prevent sharp fall below 0.9600-10 and price should stay well above previous support at 0.9550, risk from there is seen for a rebound to take place later.
Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.
On the upside, whilst initial recovery to 0.9840-50 cannot be ruled out, reckon upside would be limited to 0.9900 and bring another decline later. Above 0.9955-60 would defer and risk rebound to 1.0000 but upside should still be limited and price should falter well below resistance at 1.0100-08, bring retreat later. Only a break above this level would signal the rise from 0.9813 low has resumed and extend gain to previous resistance at 1.0171. Looking ahead, once this level is penetrated, this would signal the retreat from 1.0344 has ended, bring further gain to 1.0200-10, then test of resistance at 1.0248 resistance, only above there would add credence to this view and bring resumption of early upmove for an eventual retest of 1.0344.
Recommendation: Sell at 0.9900 for 0.9700 with stop above 1.0000
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) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.