- USD/CHF recovery could be the start of a strong cycle higher.
- New bull cycle could take USD/CHF up to a target of 1.0100 โ 1.0190.
- Scope for move to extend even further given Elliot Wave analysis.
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The USD/CHF rate will rise strongly as it enters a new cycle higher, according to Alex Geuta, an Elliot Wave expert at currency broker Liteforex.
Analysis indicates there is potential for a rise to a target between 1.0100 and 1.0190, from a current rate of 0.9969. This move is expected to be followed by a continuation up to an eventual longer-term target between 1.0600 and 1.1000, as the up-cycle accelerates before eventually peaking.
The bullish forecast is conditional on the exchange rate remaining above 0.9945, however. The bullish cycle is about to enter its steepest and strongest period, according to Geuta's analysis - a larger wave 3, visible on the daily price chart below.
Above: USD/CHF rate shown at daily intervals.
Elliot waves are cycles of buying and selling, of rising and falling prices, which are composed of 5 smaller waves numbered 1-5, or labeled using Roman numerals, as in I, II, III, IV, and V.
Waves 1,3 and 5 move in the direction of the dominant trend whilst 2 and 4 represent corrections. Wave 3 is almost always the longest and the strongest wave.
Above: Elliot Wave concept.
After a 5-wave pattern has finished the market corrects back in a shallower counter-trend move labeled A,B, and C.
Elliot wave analysts try to establish the point at which the current market is in the greater wave pattern, which enables them to predict what will happen next.
Wave 3s are the most powerful motive wave of all five major Elliot waves in a trending sequence. Not only that but it is entering the third wave on several different time frames simultaneously.
"Supposedly, an ascending momentum continues to form as the first wave of senior level 1 of (3) in the daily USD/CHF price chart," says the analyst. "The fifth wave v of 1 is developing in the 4-hour timeframe."
Above: USD/CHF rate during April, May and June.
"Apparently, the third wave of junior level (iii) of v continues forming in the 1H timeframe, with an emerging ascending momentum inside," says Geuta, adding, "If the presumption is correct, the USD/CHF rate will continue rising to levels 1.0100 โ 1.0190."
Above: USD/CHF rate in June and July.
In the hands of a competent analyst and trader Elliot waves are considered by many to be a reliable method for forecasting price moves.
In 1984 the Elliot wave expert and author of "The Wave Principle", one of the leading texts on Elliot Wave analysis, Robert Prechter won the US Trading Championship in options with a stunning 444% gain. The next closest competitor showed an 84% gain.
Nevertheless, Prechter hasn't always been right: he famously called for a continuation of the great bear market after stocks bottomed in 2009, when instead stocks rallied to new highs.
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