GBP/CHF – 1.2410
Although sterling found support at 1.2221 last week and rebounded, as renewed selling interest did emerge at 1.2505 and price has retreated, retaining our bearishness (we recommended in our previous update to sell at 1.2500 and a short position was entered) for the fall from 1.3069 top to resume after consolidation, below 1.2300 would bring retest of 1.2221 but break there is needed to confirm and extend weakness to 1.2102. Looking ahead, a drop below 1.2102 would signal early correction from 1.1475 (2016 low) has ended at 1.3069, bring further fall to psychological support at 1.2000 which is likely to hold on first testing.
To recap the larger degree count, the selloff from 2.4965 (July 2007) is the beginning of wave V with circle and is labeled as 1: 2.3760, 2: 2.4425, wave 3 extension ended at 1.1470, followed by wave 4 at 1.5547, the quick rebound from 0.9106 suggests wave 5 as well as entire circle wave V could have ended there, hence consolidation with mild upside bias is seen for major correction to take place, bring initial test of 1.5547 (previous 4th of a lesser degree).
On the upside, expect recovery to be limited and as long as said resistance at 1.2505 holds, bearishness remains for another decline to aforesaid downside targets. A break of 1.2505 would defer and risk a stronger rebound to 1.2580-85, break there would risk further gain towards resistance at 1.2646 but still reckon upside would be limited to 1.2700-10 and price should falter well below said resistance at 1.2854, bring another selloff later.
Recommendation: Hold short entered at 1.2500 for 1.2275 with stop above 1.2510.
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 4.6175 (Feb 1981), the wave III with circle ended at 1.7425 (Nov 1995) and followed by wave IV with circle at 2.4965 (July 2007 with a short wave C) and wave V with circle has possibly ended at 0.9106. A monthly close above 1.5547 would add credence to this view, bring major correction to 1.7000, then towards psychological level at 2.0000.