USD/CHF – 0.9470
Although the greenback has retreated after running into resistance at 0.9680 last week and initial downside risk of marginal weakness towards 0.9400, loss of near term downward momentum should limit downside and bring rebound later. Above 0.9570 would bring rebound to 0.9615-20, break there would encourage for test of indicated resistance at 0.9680 but break there is needed to suggest low is formed, bring a stronger rebound towards resistance at 0.9773. Looking head, only break of this level would provide confirmation and bring retracement of recent decline to resistance at 0.9808 but previous support at 0.9859 should hold from here.
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 downside, whilst marginal weakness from here cannot be ruled out, reckon downside would be limited to 0.9390-00 and reckon 0.9350 would hold. If decline gathers momentum, this would indicate medium term erratic decline from 1.0344 top (formed back in late 2016) is still in progress and may extend further weakness to 0.9300, however, loss of downward momentum should prevent sharp fall below 0.9250-60 and 0.9200-10 should hold, risk from there has increased for a rebound to take place later.
Recommendation: Stand aside for this week.
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.