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USD/CAD Elliott Wave Analysis

USD/CAD – 1.3510

USD/CAD – Wave v ended at 0.9407 and a-b-c correction may extend gain to 1.4700

Although the greenback did meet selling interest at 1.3547 and retreated (we recommended in our previous update to sell at 1.3530 and a short position was entered), as the pair found support at 1.3426 yesterday and has rebounded again, suggesting further consolidation above lsat month’s low at 1.3387 would be seen and another bounce to said resistance at 1.3547 cannot be ruled out, however, still reckon 1.3590-00 would cap upside and bring another decline later. Below 1.3426 support would signal decline from 1.3794 top has resumed for retest of 1.3387, break there would extend weakness to 1.3320-30, then towards support at 1.3262 but reckon key support at 1.3223 would hold from here, bring rebound later. Looking ahead, only a daily close below this level would provide confirmation that recent upmove has ended at 1.3794, bring further subsequent decline to 1.3140-50 and then 1.3090-00.

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 to 1.2832 support, then 1.2410-20.

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 upside, whilst initial recovery to 1.3547 cannot be ruled out, reckon upside would be limited to previous support at 1.3571 and bring another decline later. A daily close above previous support at 1.3571 would suggest the first leg of decline from 1.3794 has ended, bring a stronger rebound to 1.3610-15 and possibly towards resistance at 1.3670, price should falter well below said resistance at 1.3794, bring another decline later.

Recommendation: Hold short entered at 1.3530 for 1.3330 with stop above 1.3630.

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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