USD/CAD – 1.2876

The greenback has maintained a firm undertone after recent rally above previous resistance at 1.2778, adding credence to our bullish view that low has been formed at 1.2061 and mild upside bias remains for this rise to bring retracement of early decline, hence further gain to 1.2925-30 (50% Fibonacci retracement of 1.3794-1.2061), then towards psychological resistance at 1.3000 would be seen, however, reckon upside would be limited to 1.3090-00 and price should falter below 1.3130-35 (61.8% Fibonacci retracement), 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.

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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, whilst initial pullback to 1.2800 cannot be ruled out, reckon downside would be limited to 1.2700-10 and bring another rise later. Only a drop below previous resistance at 1.2599 (tentatively wave i top) would suggest top is possibly formed, bring weakness to 1.2550, then towards 1.2500 but still reckon support at 1,2433 would remain intact, bring another rally later.

Recommendation: Buy at 1.2700 for 1.2920 with stop below 1.2600.

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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