AUD/CHF - Correcting before lower

AUD/CHF - Correcting before lower

AUD/CHF correcting before lower

This a cross I normally do not followed, but was asked if I would take a look at it, which I would like to do. At the same time it gives me the chance to show you, how I break down an analysis of a currency cross I normally don't follow.

So here we go.

I always start with a monthly chart, with as much data as possible, which in this case is back to January 1992. The first thing I then try to establish is the long term trend, which is slightly to the downside. The swings inside the slightly falling channel is very extreme as every swing is almost corrected 100%, but not quite.

Now I already know quite a lot about this cross. In theory we could have seen a long term bottom at the October 2008 low at 0.6933, but first of all, we didn't see a break above the channel resistance-line and more importantly we didn't see a break above the November 2007 high at 1.0825, which tells me that the trend is still to the downside.

With that knowledge I want to explore the decline from the August 2012 high at 1.0349 and it is clearly in five wave confirming the trend lower. After a five wave decline I would always look for a correction, which currently is unfolding and with that in mind I will zoom in on a lower time-frame.

Here I have just zoomed in on the weekly time-frame as I already seems to have a good idea, what's going on. Now looking at the weekly chart of AUD/CHF (the lower chart), I first find the Fibonacci corrective targets of the five wave decline from 1.0349 to 0.7723. The first target I will look for is the top of wave 4 of the five wave decline as this would be a very common target for a correction. When the 38.2% corrective target of the decline from 1.0349 to 0.7723 falls at the exact same point 0.8723, it just makes this resistance much stronger, but will it protect the upside?

Well, resistance at 0.8723 will likely be able to produce a move lower towards 0.8346 and possibly even lightly lower to 0.8227, before a new rally higher towards 0.9342 and maybe even higher, taken the wild swings from the past into consideration.

So let's sum up the conclusions, that we can draw from these two charts. We are in a major declining channel. We have seen a five wave decline from 1.0349 to 0.7723 and the current rally of the 0.7723 should regarded as a correction facing strong resistance at 0.8723, which most likely will produce a move lower in wave b to 0.8346 before the next move higher in wave c of the correction towards 0.9342 and maybe even slightly higher, but only time will tell.

  

Roelant
2016-06-26
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