USD/CHF Weekly Outlook

Despite edging higher to 1.1883 last week, Friday's selloff indicates that rise from 1.0366 has completed the five wave structure, ending with a diagonal triangle and a short term top is formed. Some correction should now be seen this week, targeting 1.1313 cluster support (38.2% retracement of 1.0366 to 1.1883 at 1.1304) or below. But downside should be contained by 1.0864/1277 support zone and bring rally resumption. On the upside, though, break of 1.1883 is needed to indicate that rise from 1.0366 has resumed for 1.2248/96 resistance zone. Otherwise, further consolidation would still be seen.

In the bigger picture, current favored interpretation is that medium term rise from 0.9634 has topped at 1.2248 orthodox top rather than 1.2296. In other words, three wave structure of the fall from 1.2258 to 1.0366 argues that it's merely a correction in the medium term up trend. The impulsive five wave structure of the rise from 1.0366 to 1.1883 supports is also consistent with there case that it's resuming medium term up trend. Having said that, decisive break of 1.2248/2296 will confirm medium term up trend resumption for 1.3283 resistance next. On the downside, though, break of 1.0864 support will dampen this case and turn outlook mixed.

In the longer term picture, the outlook is rather mixed for the moment. A long term bottom is no doubt in place at 0.9634 with bullish convergence condition in daily MACD. However, USD/CHF is still maintaining the pattern of lower highs (1.8305, 1.3283, 1.2296) and failed to sustain above 55 months EMA. We're prefer to wait for at least some sustained trading above the 55 months EMA before committing to the bullish outlook.

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