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USDCHF: Rally Off The 0.9639 Level Set To Strengthen Further

Tue, Dec 2 2008, 14:10 GMT
by Mohammed Isah

FXTechstrategy

While USDCHF put in a negative weekly close the past week, it remains suggestive of a corrective pullback of its current medium term uptrend started at the 0.9639 level.

The pair’s bottoming and reversal off the 0.9639 level, its Mar’08 low came on the back of its multi-year sell off from the 1.8222 level, representing its July’01 high. That declines bottomed out in Dec’04 at 1.1288 where a rally pushing the pair to a high of 1.3287 in Nov’05 ensued. The nine months rally ended at that level and took USDCHF lower maintaining its medium to long term weakness started at the 1.8222 level which ultimately halted in Mar’08 at 0.9638.

Figure 1: Weekly Chart

The USDCHF’s journey to the upside off the 0.9639 level though smooth with consecutive weekly gains stalled at the 1.0625 level in early May’08 and subsequently collapsed returning the pair to a low of 1.0013 before reversing higher to print a swing low in early July’08.The mentioned rally resumed following a break and close above the 1.0625 level driving the pair further higher for 6 weeks before backing off in early Sept’08 at 1.1418 to begin a two of corrective pullback ahead of continuing its already established medium term uptrend .The pair then hit a 16-month high of 1.2298 the previous week and turned sharply lower off that high the past week to close at 1.1831.

Figure 2: Monthly Chart

Our outlook for the pair remains to upside in the medium term with this view being supported by a pattern of higher highs and lows on the weekly time frame. Additionally, our basic Elliot wave count puts the move from the 1.0013 level as wave three. As usual with this pattern, its end normally starts the beginning of wave four declines (which is corrective). This suggests that any pullbacks or declines at the pair’s current price remain corrective of its move from the 0.9639 level. Its higher (quarterly and monthly) time frame charts continue to maintain bullish stochastics and price action supporting the above view.

While further upside incursions have the 1.2470 level, it Jun’07 high, the 1.2771 level, its Oct’06 high and its Nov’05 high at 1.3287 to contend with, corrective pullbacks will target the 1.1831 level, its Nov 25’08 low initially followed by its Oct 24’08 high at 1.1749 and then its Dec’07 high at 1.1596.

On the whole, with a clear pattern of higher highs and lows with continued bullishness seen, USDCHF’s medium term uptrend started at the 0.9639 level has further upside to go.

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Published on  Tue, Dec 2 2008, 14:15 GMT