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USD/CAD Elliott Wave Analysis

USD/CAD – 1.2485

Although the greenback retreated late last week to 1.2254, renewed buying interest did emerge there and has rebounded (we recommended in our previous update to buy at 1.2260 and a long position was entered), retaining our near term bullishness for the rebound from 1.2061 temporary low to bring retracement of recent decline (indicated upside target at 1.2460 had been met with 200 points profit) towards 1.2500-10, however, near term bought condition should prevent sharp move beyond 1.2550 and price should falter well below resistance at 1.2663, bring retreat later.

We are keeping our view that the wave b from 1.0657 (a leg top) has possibly ended at 0.9633 with (a): 0.9800, wave (b): 1.0447 and wave c at 0.9633, the subsequent rise from there is now treated as wave c exceeded indicated upside target at 1.3770-80 and 1.4000 and wave (3) has possibly ended at 1.4690 and wave (4) correction has commenced for retracement back towards 1.2000.

On the daily chart, our latest preferred count remains that the A of (B) rally from 0.9059 low (7 Nov 2007) unfolded into an impulsive wave with i: 0.9059-1.0380, ii ended at 0.9819, iii at 1.3019 followed by triangle wave iv at 1.2026 , then wave v formed a top at 1.3066 and also ended the wave A. The wave B is unfolding as an double three a-b-c-x-a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c at 1.0784, followed by wave x at 1.1725, another set of a-b-c unfolded with 2nd a at 0.9931, 2nd b at 1.0674. the 2nd c has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3900 had been met and gain to 1.4700 would follow.

On the downside, expect pullback to be limited to 1.2310-15 and bring another rebound. Below said support at 1.2254 would defer and suggest top is possibly formed, risk weakness to 1.2197, however, a daily close below there is needed to signal the rebound from 1.2061 has ended, bring test of support at 1.2121. Looking ahead, only break there would confirm and indicate recent decline has resumed for retest of said recent low at 1.2061, break there would extend medium term downtrend towards psychological support at 1.2000 but reckon downside would be limited to 1.1925 (61.8% projection of 1.3794-1.2414 measuring from 1.2778). We are keeping our bearish count that wave b ended at 1.3794 and wave c has commenced for further fall towards psychological support at 1.2000. 

Recommendation: Long entered at 1.2260 met target at 1.2460 with 200 points profit and would stand aside for this week.

Longer term – The selloff from 1.6194 (21 Jan 2002) to 0.9059 (07 Nov 2007) is viewed as (A) wave which is a 5-waver as labeled on the monthly chart as below, the subsequently rally is labeled as (B) with impulsive A leg of (B) ended at 1.3066, wave B of (B) is unfolding which has either ended at 0.9407 or would extend one more fall but downside should be limited to 0.9200 and 0.9000 should hold.

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