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Eur/chf, sharply lower prices over next few months?

Thu, Sep 4 2008, 14:04 GMT
by David Solin

FXA

The bearish view in eur/chf remains in place as the 3 wave correction from the March low at 1.5450 was likely completed at the July 31st high at 1.6395 (A-B-C, see daily chart below), and targets eventual declines back to 1.5450 and below ahead. Note too that the daily macd is in sell mode (see bottom of daily chart below), while the market may be within wave 3 in the fall from the 1.6395. This raises scope for a downside acceleration ahead as 3rd waves within these patterns are often the most “explosive”. Short from the Aug 20th sell at 1.6195 and for now, would use a close above the bearish trendline from late July as a sign to stop (currently at 1.6190). Nearby support is seen at 1.5990 (July 16th low) and 1.5925 (50% retracement from the March low at 1.5450). Note that a downside acceleration in eur/chf could be driven buy safe haven buying of swiss, and raises the specter of a broader financial market turmoil over the next few months (within the often dangerous Sept/Oct timeframe for equities). Though not a forecast per se, clearly something to watch out for.

Longer term, no change in the long held bearish view as the 5 wave fall from the Oct high at 1.6830 (see numbering on weekly chart/2nd chart below), argues that the bigger picture downside is not “complete”, and with eventual declines back to the March low at 1.5450 and even below (see “ideal” scenario in red on weekly chart below). As mentioned above, looks like the multi-month period of correcting higher is “complete” with new lows favored ahead. Note too that longer term support below 1.5450 is seen at 1.5335 (62% retracement from the Sept 2000 low at 1.4400) and the nearly 6 year bullish trendline (currently at 1.5100).

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Published on  Fri, Sep 5 2008, 07:05 GMT