USD/CAD Weekly Outlook

USD/CAD's fall from 1.2984 extended to as low as 1.2125 but was so far still supported by mentioned 1.2098 support. Subsequent recovery turned 4 hours MACD above signal line, indicating that an intraday bottom in in place. Initial bias will be neutral this week. On the upside, above 1.2478 will suggest that correction from 1.2984 was contained by 1.2098 as expected and flip intraday bias back to the upside for retesting 1.2984/3015 resistance zone. However, as mentioned before, break of 1.2098 will indicate that consolidation from 1.3015 is still in progress and deeper decline should be seen to retest 1.1464 before completion.

In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Hence, some medium scale consolidation might be seen now. However, note that firstly, downside of such consolidation should be contained by bottom of the fourth wave in a lower degree at 1.1304. Secondly, sustained break of 1.3015 will confirm that the medium term up trend has resumed, with the fifth wave started and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.3469.

Though, note that sustained break of 1.1304 will indicate that the fifth wave as likely completed at 1.2984 already. In other words, whole rise from 0.9056 has possibly completed too. Deeper correction should then be seen in such case.

In the longer term picture, the decisive break of 55 months EMA affirms that case that a long term bottom is already formed at 0.9056 with bullish convergence condition in monthly MACD. At this moment, it's too early to conclude how far this up trend will eventually extend to. Nevertheless, note that the impulsive nature of the rise from 0.9056 indicates that the price actions after the rise from 0.9056 completes a five wave sequence will be corrective in nature, and be followed at least another medium term up trend before completing the long term rise.

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