GBP/CHF Elliott Wave Analysis

GBP/CHF – 1.6592

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

Sterling's retreat from 1.7113 suggests further consolidation would take place and mild downside bias remains for weakness to 1.6500 and then 1.6400, however, only a break of support at 1.6317 would signal the wave ii correction from 1.6118 has ended at 1.7113, then retest of this key support would follow.

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.

Under this count the decline from 1.8114 to 1.6118 is the wave i of 5 and wave ii is still unfolding, 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 upside, expect recovery to be limited to 1.6800 and 1.6950/55 should hold, bring such fall. Only above minor resistance at 1.7010/15 would bring another test of strong resistance at 1.7113 but it is necessary to see a breach of this key level to bring stronger retracement of early fall from 1.8114 in c leg of wave ii towards 1.7337 (61.8% Fibonacci retracement of 1.8114-1.6118). Having said that, price should falter well below resistance at 1.7440/45 and bring another fall later.

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.