“Wave (5) could extend the pair’s weakness a little more, but eventually EURCAD should start rising in wave II/B, which could lead the rate up to at least 1.47.” This is the final sentence of a forecast, called “EURCAD to Find Support Soon”, which we published on August 31st, 2014. Since then, the exchange rate has been making higher highs and lower lows in the zone between 1.3880 and 1.4640. A strange behavior, which is a real nightmare, especially to breakout traders. The chart below shows how our forecast of EURCAD looked like more than four months ago.
As visible, the pair has been in a strong downtrend since the March top of 1.5583. What gave us the reason to expect a recovery, was the wave structure of the decline. It was a five-wave impulse. According to the Elliott Wave Principle, every impulse is followed by a correction in the opposite direction. On December 16th EURCAD reached 1.4641, which is satisfactorily, according to the forecast. However, there is no way we could have predicted that the correction we were expecting was going to be an expanding triangle. On the chart below you can see how EURCAD has been developing.
Wave (5) did extend the pair’s weakness to 1.4033. Soon after that the corrective wave B triangle started. Just like the common contracting triangle, the expanding one precedes the final movement of the larger sequence. In this case the larger sequence seems to be an A-B-C zig-zag. Wave C, which is currently under construction, does not look finished yet, but is probably in its final stages. This means, that if this is the correct count, the bears should not get over-confident about EURCAD, because a reversal to the upside could occur soon.
