close icon

GBPCAD Bears Have Officially Returned

The last time we wrote about GBPCAD was almost half a year ago. On January 16th, 2017, the pair was hovering around its lowest level since July, 2013, after a decline from 2.0972 to as low as 1.5736. Usually, trading in the direction of the larger trend is a good strategy. Except when it is not. Traders had all the reasons to trust the bears, since they have been in charge for 14 months already, and open short positions in GBPCAD near 1.5740.

Unfortunately, no trend lasts forever, and the pound’s downtrend against the Canadian dollar is no exception. Instead of continuing further to the south, the pair undertook a significant surge lifting it to 1.7852 three months later. GBPCAD might have left trend-following traders scratching their heads, but to Elliott Wave analysts, the rate’s rally did not come out of the blue. The chart below shows how the Elliott Wave Principle managed to warn us about the bullish reversal six months ago.
gbpcad elliott wave chart
This chart was published in “GBPCAD Threatens to Kill Late Bears’ Profits”. It shows that the decline in question was actually a complete five-wave impulse. According to the theory, every impulse is followed by a three-wave correction in the other direction. Also, the MACD indicator was flashing a double bullish divergence between the last three lows. These were two solid technical reasons not to sell near 1.5740. Today is July 5th, 2017, and the daily chart of GBPCAD looks like this:

gbpcad elliott wave chart july 5
Actually, the anticipated three-wave recovery began the very same day. Between January 16th and May 5th, GBPCAD added 2116 pips. Apparently, Brexit woes do not matter, if they coincide with the bullish phase of the wave cycle. However, after reaching its May top, the pair reversed to the downside again and is trading around 1.6730 as of this writing. In order to find out what this means, let’s take a look at the 4-hour chart, which will allow us to see the structure of the recent selloff.
gbpcad elliott wave analysis
As visible, the current weakness could be seen as a complete impulsive decline, as well. In addition, the MACD indicators is once again showing a bullish divergence between waves 3 and 5. The combination of a complete impulse and a MACD divergence on the pair’s daily chart led to a bullish reversal six months ago. Why should we expect a different outcome now? It is the same exercise.

The 4-hour chart tells us two things. First, the bears have officially returned, because this pattern indicates the direction of the larger trend. And second, the selling right away is not a good idea, because a corrective recovery in wave (2/B) should follow, before the downtrend resumes.

Stay informed with our newsletter

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

Privacy policy
You may also like:

USDCAD Rises in Predictable Elliott Wave Manner

USDCAD rose significantly this past week, climbing from 1.2512 at the open to as high as 1.2949 Friday. The surge can be attributed to the slide in crude oil prices. Oil and USDCAD are known to have an inverse correlation due to the heavy reliance of the Canada’s economy on the commodity. And while the…

Read More »

Two Months Ahead of the 400-Pip Slide in EURUSD

Economic and fiscal steps taken to help the global economy rebound from the COVID-19 crisis are still in effect in both U.S. and EU. The amount of stimulus by the Fed far eclipsed the measures taken by the ECB. Direct unemployment payments are even creating a labor shortage. Many people prefer to rely on government…

Read More »

Elliott Wave Support Can Send USDZAR 15% Higher

It’s been a bad year for USDZAR bulls. The pair has been declining ever since it reached a high of 19.34 in early-April 2020. As of this writing, it is barely holding above 14.30, down 26% in a little over twelve months. Does this mean now is a good time to join the bears? We…

Read More »

Ahead of EURUSD ‘s Disappointing Start to 2021

Overall, 2020 was a good year for EURUSD bulls. Despite the March crash during the coronavirus-related volatility, the pair ended the year up almost 9%. With more stimulus already in the pipeline at the start of 2021, it made sense to expect further devaluation of the dollar against the Euro. Alas, common sense doesn’t always…

Read More »

USDJPY Gains 450 Pips and Counting in Two Months

2020 wasn’t a good year for USDJPY bulls. Starting from 108.63 in January, the pair closed at 103.32 on December 31st, down 4.9% in twelve months. But what the dollar lost against the yen in the entire 2020 it is now close to recouping in less than three months. USDJPY is approaching 108.50 as of…

Read More »

USDTRY Drop Accelerates as Elliott Wave Predicted

The Turkish Lira hit its highest level against the U.S. dollar in six months. The country economic and legal reforms announced last year coupled with tighter monetary policy appear to be giving the desired effect. USDTRY is down 19.3% from its November 2020 high after being in an uptrend since mid-2008. Most analyst, however, are…

Read More »

EURUSD Surges 570 Pips After Fibonacci Encounter

EURUSD is trading at levels last seen in April 2018, when it was on its way down to 1.0636 by March 2020. The pair is now approaching 1.2200, up 14.5% since the COVID-19 selloff nine months ago. But trends don’t move in a straight line. Two months ago, we showed you how Elliott Wave analysis…

Read More »

More analyses