GBP/CHF Elliott Wave Analysis

GBP/CHF – 1.6835

GBP/CHF – Wave 4 correction from 1.5122 has ended at 1.8114.

The stronger-than-expected rebound from 1.6317 suggests the wave ii from 1.6118 is still unfolding and mild upside bias is seen for test of resistance at 1.7036 but break of 1.7113 is needed to confirm the c leg of wave ii is indeed taking place for further headway to 1.7337 (61.8% Fibonacci retracement of 1.8114-1.6118) but price should falter well below resistance at 1.7440/45 and bring another fall later.

To recap the larger degree count, the selloff from 2.4967 (July 2007) is the beginning of wave V with circle and is labeled as 1: 2.3763, 2: 2.4429, wave 3 extension ended at 1.5122 (sub-divided into i: 2.3490, ii: 2.4209, iii: 1.9605, wave iv: 2.0359 and wave v: 1.5122). Our preferred count remains that wave 4 from 1.5122 has ended at 1.8114 with a: 1.7486, b: 1.5849 and wave c at 1.8114.

On the downside, expect pullback to be limited to 1.6700 and 1.6600 should hold, bring such a rise in wave c of wave ii to aforesaid upside targets. Only a daily close below 1.6500 would shift risk back to downside for another fall towards 1.6317 and if sterling drops below this support, then test of key support at 1.6118 would follow. Looking ahead, once support at 1.6118 is penetrated, this would confirm the wave ii of wave 5 has indeed ended, then wave iii of 5 would extend weakness to support at 1.5849 and later to next minor support at 1.5647 probably later part of Q1 2010.

On the Monthly chart, the longer-term count is that major downtrend is under way with circle wave I at 2.8645 (Sep 1.978), then wave II with circle at 4.6178 (Feb 1981), the wave III with circle ended at 1.7424 (Nov 1995) and followed by wave IV with circle at 2.4967 (July 2007 with a short wave C) and wave V with circle is taking place. Although sterling has rebounded from 1.5122, expect resistance 1.9378 (previous support turned resistance) to cap upside and bring the final leg of wave V for retest of 1.5122, then psychological support at 1.5000