close icon

EURCAD Bulls Setting Up a 400-Pip Recovery?

The European currency has had a tough time recently, losing ground against major rivals like the U.S. dollar and the Japanese yen. Here we are going to examine the Euro’s drop against the Canadian dollar, which has been in progress since March 20th, when EURCAD climbed to a multi-year high of 1.6153. The last time the pair reached such highs was almost nine years ago, in July 2009.

Given the significance of the recent top it is time to ask what the current decline means. Is it a buy-the dip opportunity or the beginning of an even bigger selloff? If the second is true, should traders short EURCAD right away or wait a while? Let’s apply the Elliott Wave Principle to the 2-hour chart below and see if it can provide the answers.
eurcad elliott wave analysis
This graph visualizes EURCAD’s drop from 1.6153 to 1.5317 so far. As visible, its structure can easily be labeled 1-2-3-4-5, which means the pair’s decline is impulsive. Wave 1 is an expanding leading diagonal, followed by a sharp, but smaller rally in wave 2. Wave 3 is extended, allowing us to count its sub-waves two trend degrees down. Wave 4 is a simple a-b-c zigzag, whose ending diagonal wave “c” terminated shortly after touching the 38.2% Fibonacci level. The rest of the plunge is supposed to be the final wave 5.

According to the theory, impulse patterns develop in the direction of the larger trend. This tells us that EURCAD has fallen under bearish jurisdiction and more weakness should follow. Not right away though, because every impulse is followed by a three-wave correction in the other direction. If this count is correct, once wave (v) of 5 completes the entire wave (1/A), a major corrective recovery in wave (2/B) is likely to lift the pair to 1.5700, where the resistance of wave 4 should put pressure on it again. As of this writing, EURCAD is trading in a high-risk reversal area, where it is too late to sell and too early to buy.



Stay informed with our newsletter

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

Privacy policy
You may also like:

EURUSD Reversal Needed “Breathing Space”

EURUSD plunged below 1.1260 earlier today. The pair has been steadily declining during the last twelve months and the latest drop suggests a new low is very likely to be reached soon. But it wasn’t all that clear two weeks ago, when the Euro was hovering around 1.1400 against the U.S. dollar. Then the Elliott…

Read More »

A Month Ahead of USDCAD ‘s Bullish Reversal

USDCAD finished 2018 in a positive mood. The pair reached 1.3665 on the last day of last year, but 2019 has not been so generous to the bulls so far. By February 1st, the rate was down to 1.3069, losing over 4.3% in just a month. But let’s take a step back and see where…

Read More »

EURNZD: Is February Going to Mimic December?

It was November 30th, 2018, when we last talked about EURNZD. The pair was trading near 1.6570, following a sharp selloff from as high as 1.7929 in less than two months. After such a huge and fast decline, traders were understandably very pessimistic about the pair’s prospects going into December. However, extrapolation is a dangerous…

Read More »

GBPNZD: Reversal in Place, Negative Outlook Intact

Less than two weeks ago, GBPNZD was hovering near 1.9160, following a recovery from as low as 1.8127. After a 10-figure rally in just a month and a half, the bulls were getting more and more confident in their ability to keep pushing the pair higher. Unfortunately for them, the market was already sending a…

Read More »

GBPNZD: A Bearish Elliott Wave Cycle is Worrisome

Three weeks ago, GBPNZD was hovering around 1.8900, but the Elliott Wave principle suggested the recovery from 1.8125 was “far from over.” A three-wave pullback was supposed to occur, followed by another rally towards the resistance area between 1.9250 – 1.9630. The chart below, published on January 2nd, explains. The recovery from 1.8125 looked like…

Read More »

NZDUSD Fibonacci Bounce Causes Optimism

At the start of December, 2018, NZDUSD almost reached 0.6970. A month later, the “flash crash” which brought chaos to many other Forex pairs, dragged the New Zealand dollar to 0.6586 on January 2nd, 2019. As of this writing, NZDUSD is hovering around 0.6760 and the bulls are probably wondering whether this is a chance…

Read More »

GBPNZD ‘s Elliott Wave Recovery Far from Over

A month ago we shared our view that despite being long-term bearish on GBPNZD, we thought it was time for a notable recovery. While the pair was hovering around 1.8400, the market was sending a message that a recovery to roughly 1.9000 was around the corner. As always, this message had nothing to do with…

Read More »

More analyses