GBP/CHF – 1.2385
Sterling ran into renewed selling interest at 1.2854 earlier this month and has dropped sharply from there, reviving our bearish view and suggesting the rebound from 1.2241 (June low) has ended there, hence consolidation with downside bias is seen for weakness to 1.2300, then test of support at 1.2270, however, break of latter level is needed to add credence to this view and signal the decline from 1.3069 top has resumed for retest of 1.2241. Looking ahead, a drop below this level would suggest early correction from 1.1475 (2016 low) has ended at 1.3069, bring further weakness towards previous support at 1.2102 but psychological support at 1.2000 would 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, whilst recovery to 1.2450 cannot be ruled out, reckon upside would be limited to 1.2500-10 and bring another decline later. Above 1.2580-85 would defer and risk test of resistance at 1.2646 but only a daily close above this level would suggest the retreat from 1.2854 has ended instead, risk a stronger rebound to 1.2700-10 and then 1.2750-55 but price should falter well below said resistance at 1.2854, bring another selloff later.
Recommendation: Sell at 1.2500 for 1.2275 with stop above 1.2600.
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.