Two days ago, USDCHF fell to a low of .8671 just above S2 of the weekly pivot calculation. As I wrote then, the low formed a hammer candle at weak support and there was positive divergence on the three-hour chart. The pair then rose to .8834 and dropped to .8689. On the one-hour chart, this looks clear as a potential ABC pattern. Leg C of this would be .8790 if C=.618 of A, and .8852 if it should equal A, or .8953 if 1.618A. The pair has only managed to rally to .8761 and here it is struggling.
The pair also appears to be coiling within a triangle. If this is a consolidation move and it breaks below it, the potential target is .8537. This aligns with some targets I have from Elliott analysis on monthly and weekly charts. Unfortunately, I have other targets lower than that, down to .7980 from point and figure work and from Elliott. A reader pointed out that a downtrend line drawn off the lows for the past 100 years is coming in but it looks as though the pair is threatening to break that. One would still expect a rally up to at least .8790 as the triangle legs aren't complete.
Interesting price behavior at interesting psychological extremes. Is there anyone who has a positive opinion about the dollar. On the other hand, who is left to sell except some weak hands?
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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