Bottom line: USDCHF bearish outlook remains intact until prices stay below 1.0023, which is Wave 2 termination.
Technical Analysis:
USDCHF seems to be pulling back after terminating Wave 3 of (3) below 0.9650 on December 31, 2019. Looking at the short term wave structure, bulls are poised to carve a Wave 4 top and might push prices through 0.9789 levels. Please note that the above is also 38% retracement of Wave 3, a common relationship for Wave 4 termination. Once this pullback is over, we can expect USDCHF to reverse lower again targeting below 0.9650. Ideally, the current pullback should end before 0.9840 levels, which is Wave 1 termination, as labelled here. The overall wave structure since 1.0237 highs in April 2018 reveals that the bearish structure is expected to remain intact until prices stay below 1.0027 levels, the Wave (2) termination. A classic 5-3-5 Elliott Wave pattern is underway, and the last 5 waves lower are seen to be unfolding. The drop between 1.0237 through 0.9659 was impulse, labelled as Wave (1). This was followed by a corrective rally A-B-C through 1.0027, labelled as Wave (2). Since then, USDCHF has been unfolding into Wave (3) subdivisions lower. Trading point of view, one can hold short positions from higher levels for long term targets below 0.9650. Fresh short positions could be initiated around 0.9789 levels, with stops above 0.9850 and projected targets below 0.9650, going forward. The current price action has been drifting a bit sideways but a push through 0.9789 could be expected before the drop resumes. Only a sustained break above the 1.0023 resistance, would nullify the above bearish structure. Bottom line, USDCHF should remain in control of bears and prices are expected to drop towards 0.9650 and further with 1.0023 resistance intact.
Prepared by
Harsh Japee, Technical Analyst.
USDCHF Chart
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