The EUR/CHF is setting itself up for a major long-term bullish trend phase. Powerful bullish momentum could soon commence.
This analysis will take a look at recent price developments of this currency pair.
I discussed in previous posts how an ending diagonal in the EUR/CHF was forming as part of wave 5 of 1 of a large scale uptrend (see turquoise and green wave labels to the left of the chart). The expected bearish break appeared after the wedge pattern and can be counted as a complete ABC structure (green wave 2). The significant bullish momentum since early Feb is unlikely to be still an extension of the bearish correction. The price action fits much better into the very early stages of the Green wave 3.
Two possible scenarios are highlighted in the chart above. The pale blue wave count would imply that immediate wave 3 momentum is about to start, which would entail pushing price upwards pretty much in a straight line and take it well above the previous high of the diagonal, with an overall target of 1.3350 (the 161.8% extension level of green wave 1).
The black wave count alternative suggests that we may require one more brief bearish correction (black alt. 2) before the same strong bullish momentum should commence as in the first scenario with the same overall target.
Of note is that EUR managed to post a positive day against the CHF yesterday in spite of being sold off intensely against the USD (due to the fact that CHF sold off even harder against the USD). This clearly shows significant CHF weakness and could allow the EUR/CHF to rise even if EUR/USD goes into further weakness in the short term.
In addition, cross market correlation points towards a return to ‘risk-on’ sentiment. USD/JPY and most index price structures all point towards bullish price-action in the near-term. Safe-haven currencies like the CHF and JPY are therefore likely to be dumped again.
All the best along your trading journey.