On the 4-hour chart of U.S. Dollar/Swiss Franc (USD/CHF) currency pair we can see that at the end of May, the market accomplished a three-wave recovery in Wave 4 as part of a downtrend; at the 0.9807 level from where a drop occurred, which we labeled as final Wave 5 of C). Ideally that was an ending diagonal; a strong reversal pattern that looks to have formed a bottom at the 0.9612 level and a current recovery is already at Wave 1/A and 2/B of a three wave rally. That being said, more gains are expected to follow.

USD/CHF, 4-hour

The ending diagonal is a special type of motive wave that occurs primarily in the Wave 5 position when a  price has moved too far and too fast. Some ending diagonal triangles appear in the C wave of an ABC correction. In all cases, the ending diagonal terminates the move of larger patterns. They consist out of five waves, with each having three more sub-waves and they usually suggest sharp reversals.

Basic ending diagonal: