close icon

Ahead of the Plunge in USDCAD

Ten days ago, on April 4th, USDCAD was hovering around 1.3450. Yesterday, the pair fell to as low as 1.3223, before recovering to 1.3338. As traders, we are interested in the reasons behind that 230+ plunge and how to be prepared for it next time. Should we watch Trump, who just said the dollar was too strong for its own good? Or should we pay more attention to economic reports, political tensions or commodity prices, in order to be able to anticipate the next major move?

Well, in our opinion, even if you take all these factors into consideration, you will still fail to interpret them the same way as the market does. What to do then? Our solution is the Elliott Wave Principle, which we applied to the following chart, sent to clients on April 4th.
usdcad elliott wave chart
There are several patterns in the Wave Principle’s catalogue, but the most common combination is between a five-wave impulse and a three-wave correction. That was exactly what the hourly chart of USDCAD allowed us to recognize ten days ago. An impulsive decline from 1.3534 to 1.3264, followed by a w-x-y double zig-zag correction up to 1.3455. According to the theory, once this 5-3 wave cycle is complete, the trend resumes in the direction of the five-wave sequence. That is why, instead of buying near the upper line of the corrective channel, we thought it will turn out to be a strong resistance and a significant decline should be expected. The next chart shows how things went.
usdcad elliott wave chart updated
USDCAD reversed to the south almost immediately. The invalidation level for this count at 1.3534 was never threatened. The bottom at 1.3264 was the market natural target. The U.S. dollar breached this mark on April 12th and then fell some more to 1.3223 the next day.

In conclusion, Elliott Wave analysis is useful for:

  • anticipating price reversals
  • catching large moves
  • removing external noise and allowing traders to concentrate on what the market is telling them

So, the next time you rely on the current trend or wait for some news to trigger a move, do not forget to take a look at the situation from an Elliott Wave perspective. It might just make a difference.

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

AUDNZD Bears Bumping into Fibonacci Support

Earlier this month we published an article about AUDNZD, sharing two slightly different, but both bullish counts, which are supposed to eventually lift the pair to 1.1500 or higher. It is too early to say how this is going, but at least the short-term outlook seems to support the bigger picture. AUDNZD has been declining…

Read More »

USDCAD Walks the Path to Month-Old Target

USDCAD bulls proved how stubborn they could be by lifting the pair to a one-year high, despite the numerous bearish interventions along the way. During the last month, USDCAD has been slowly progressing in a choppy and overlapping manner as U.S. – Canada relations took a turn for the worse following the G7 summit. The…

Read More »

AUDNZD Bulls Have a Decision to Make

It has been almost two years since we examined the weekly chart of AUDNZD and concluded that the pair was likely to “Throw a Surprise Bulls Party”. And indeed, the Australian dollar managed to climb to 1.1290 against the New Zealand counterpart by October 2017. Unfortunately, that was the best the bulls were capable of…

Read More »

Crude Oil and USDJPY Ruled by One Pattern

Everything was going so well for USDJPY and crude oil bulls until last week, when both the exchange rate and the WTI crude price made sharp bearish reversals. Oil fell from as high as $72.88 to $67.40 a barrel, while USDJPY plunged from 111.40 to 108.95. Normally, the media tried to explain the selloffs with…

Read More »

USDMXN Precisely Followed Its Elliott Wave Path

It has been almost four months since we last wrote about USDMXN. On January 30th, the pair was hovering around 18.70, following a sharp selloff from 19.90 to 18.30. The good news was that instead of wondering what the Dollar-Mexican Peso exchange rate was going to do next, we managed to recognize a very reliable Elliott…

Read More »

GBPAUD On a Slippery Slope Towards 1.53

If you take a look at how GBPAUD has been doing between October 2016 and March 2018 you might think Brexit never happened. The British pound rallied from as low as 1.5322 to 1.8509 against the Australian dollar, gaining almost 21% in those 18 months. As of this writing, the pair is hovering around 1.7720,…

Read More »

USDZAR Facing Elliott Wave Resistance Near 13.00

USDZAR, the ticker symbol of the U.S. Dollar – South African Rand Forex pair, is not among the ones we regularly cover. However, we are constantly looking for article material, so when a client asked us if we could take a look at it, we told him – no problem. The only thing we needed…

Read More »

More analyses