Bottom line:  USDCHF bearish outlook remains until prices stay below 0.9917 levels. Bears are potentially targeting 0.9696 as Wave 3 termination.

Technical Analysis:

USDCHF seems to be on track to continue lower at least through 0.9696, as potential Wave 3 termination. It is looking to carve a lower degree wave iv and could drift sideways for a while before dropping lower to 0.9696 as Wave 3 unfolds further. The overall wave structure could be seen as a classic 5-3 pattern of the Elliott Wave Principle. USDCHF had dropped into 5 waves from 1.0237 highs on April 26, 2019, through 0.9659 lows labelled as Wave (1). The subsequent rally was corrective (3 waves), A-B-C which terminated around 1.0027 levels on October 03, 2019. Please note that Wave C within the corrective rally unfolded as an ending diagonal, which is a reversal pattern. Since then, a potential Wave (3) could be underway and should sub divide into 5 waves lower. Within Wave (3) progression, lower degree Waves 1 and 2 are in place at 0.9840 and 1.0023 respectively; and a 3^rd of (3) rd wave is underway, towards 0.9696 at least. If the above structure is true and holds well, we should see prices staying below 0.9917 (and ideally below 1.0023) and push through 0.9696 as Wave 3 terminations. Hence a high probability trade setup is expected to be on the south side from here, against 0.9917, with potential target as 0.9696. Alternately, a break above 0.9917 would delay matters and force us to readjust the wave counts for the short term. Watch out for a push through 0.9696 going further, until USDCHF bears are able to hold below 0.9917. A push below 0.9771 levels would accelerate lower. It is a good strategy to hold on to short positions taken earlier, with stops positioned above 0.9917.

Prepared by

Harsh Japee, Technical Analyst.

USDCHF Chart

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