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USD is predicted a bright future. Which rally did not run away yet? USDCHF Elliott Wave Analysis

For a past decade USDCHF has been moving in a major downtrend hitting an all-time traded low at .7071 in August 2011. Rally from there reached .9969 in July 2012 before the price action settled in a 2 years + sideways trading range.

Retracing close to 50% of the August 2011-July 2012 advance, a major correction was finished at .8701 in March 2014, setting up an initial leg up to .9738 in early November. A bearish “doji” candle signalled a weakness, leading to a setback that is still under way today.

According to Elliott, “the primary guideline is that corrections tend to register their maximum retracement within the span of travel of the previous fourth wave of one lesser degree, most commonly near the level of its terminus.” Under such an assumption, the correction off the .9738 early November rally peak may stretch towards .9305 possibly .9212 before resuming an underlying uptrend.

Essential rule of the Elliott wave theory states that the third wave is never the shortest; hence once the correction is completed a 1.618 of the wave one may follow. Measured from an anticipated .9305 correction level this would point at a long-term target (6 month+) of 1.0983 (wave three). 1.1599 target of a wave five is calculated by projecting a 100% of the Aug 2011-Jul 2012 rally from the .8701 key higher low.  For a short-term target, we look at a nearest resistance seen at the 2006-2008 downtrend-line indicating 1.0221 (falling by 0.0006 a week).

As analyzed above, USDCHF is undergoing a correction. We seek a higher low by a maximum of .9305 for an uptrend resumption. The nearest target is seen at 1.0221 (falling by 0.0006 a week). Long-term targets (6 month+) for a wave three are indicated at 1.0983 and 1.1599 for the wave five.