Current Price: 1.2180
The USDCHF rally from 1.1877 to 1.2571 traced out 5 waves, indicating that the larger trend is up. Since the 1.2027 low, rallies have been in 5 waves, while declines have been in 3 waves.
Key Levels:
The USDCHF rally from 1.1877 to 1.2571 traced out 5 waves, indicating that the larger trend is up. Once 5 waves are completed, a correction should unfold in 3 waves. The correction that ensued was a complex one, known as a double zigzag (two a-b-c corrections connected with an X wave?labeled W-X-Y). Our confidence that a bottom is in place is improved due to the fact that the pair turned up from the 78.6% Fibonacci level of the 1.1877-1.2571 rally. There is also divergence with RSI at the recent low (there is also divergence on the daily chart). The rally beginning now should eventually take out the January high at 1.2571.
Markets are fractal, meaning that they exhibit the same patterns at all scales. Patterns of smaller scale link together to form the same patterns at a larger scale. Notice that since the 1.2027 low, rallies have been in 5 waves, while declines have been in 3 waves. In other words, the rallies are impulsive and the declines are corrective. Very short term support is at 1.2111 and 1.2075. 1.2027 is critical to the bullish case.
This chart shows the monthly pivot zone (green) as well as pivot supports (blue) and pivot resistance (red). These levels often approximate highs and lows for the month. The fact that the pair bounced off of pivot support increases confidence in the “bottoming” scenario.