USDCAD resumed downside this week after completing a corrective sideway pattern. The following 4 April USDCAD Elliott wave analysis looks at USDCAD based on Elliott wave theory.
04 April, AtoZForex – According to Elliott wave theory, prices rally or decline in 5-waves. At the end of this, a 3-wave correction follows. Though this 5-waves and 3-waves appear in different well-defined wave patterns, the basic thing is – 5-wave trend and 3-wave correction in any time frame or degree. This has proved to be usable for many traders, in any instrument and any time frame over many decades.
We expected USDCAD to drop and continue the bearish move that was established in the last two weeks in March. The bearish move was expected to be at least a 3-wave down. Before this would happen, a corrective rally to 1.3 was possible. Recognizing an established trend and trading the end of a 3-wave pullback in the direction of the trend has proved to be of high profitability.
In the last update on USDCAD, the following chart was used.
Wave (a) seems to have completed with another impulse wave. This wave degree also calls for a 3-wave bullish correction, probably to 1.3. Unless price breaks below 1.281, this should happen. Looking for a short term buying opportunity to 1.3 would be ideal. The short term idea invalidation level is at 1.281. If price breaks below this level, it thus mean wave b (circled) would be shallow. This is less likely but we must also admit that price is capable of moving in any way it deems fit. But, the scenarios painted give us an opportunity to take trades that have high success likelihood and big R/R ratio.
The intraday rally that followed ended way below 1.3 before price followed with a fast fall to continue the bearish correction wave C. The chart below shows what we have now.
4 April USDCAD Elliott wave analysis: what next?
Wave b (circled) ended at 1.295. Wave c (circled) followed and this would probably be an impulse wave. If I would trade, I would sell the dip with my SL at 1.295. If this wave count is correct, price could drop to 1.25 and thereby leave us with a 400-500 Pips potential trade opportunity. Stay tuned for the next update.
Do you have other views in contrast to the ones listed or you want to compliment them further? let’s know by your comment below.
Don’t forget to share this analysis with people that matter to you.