USD/CHF – 0.9952
The greenback has surged again after last week’s breach of previous resistance at 0.9837 (now support), adding credence to our bullish view that low has been formed at 0.9421 and upside bias remains for this rise from there to extend further gain to 0.9990-00 (61.8% Fibonacci retracement of 1.0344-0.9421), then towards 1.0050, however, near term overbought condition should prevent sharp move beyond 1.0100 resistance, risk from there is seen for a retreat to take place later.
Our preferred count on the daily chart is that early selloff to 0.9630 is an end of the larger degree wave III and major correction is unfolding from there with a leg ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b ended at 0.9910 with (a): 1.0370, (b): 1.1967, (c): 0.9910. The rise from there to 1.1730 is the wave c which also marked the end of wave IV and wave V has possibly ended at 0.7068.
On the downside, whilst initial pullback to 0.9900-05 cannot be ruled out, reckon renewed buying interest would emerge around 0.9865-70 and bring another rise later. Below previous resistance at 0.9837 (now support) would defer and risk correction to 0.9795-00 but downside should be limited to 0.9755-60 and support at 0.9737 should remain intact, bring another rise. Only a drop below 0.9737 would signal top is formed instead, bring test of key support at 0.9705 which is likely to hold from here.
Recommendation: Buy at 0.9575 for 0.9775 with stop below 0.9475.
Dollar’s long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) with wave III ended at 0.9630 (Mar 2008). Under this count, correction in wave IV has possibly ended at 1.1730 and wave V already broke below support at 0.9630 and met indicated downside target at 0.7500 and 0.7400. The reversal from 0.7068 suggests the wave V has possibly ended and the breach of resistance at 0.9595 add credence to this view and indicated upside target at 1.0000 had been met, however, the sharp retreat from 1.0296 to 0.7401 suggests choppy trading would be seen but price should stay above said record low at 0.7068.