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USDCAD Approaching 1.3800 Target

USDCAD climbed to 1.3757 this Tuesday after the recovery from 1.3222 continued. The pair has been making higher highs and higher lows since mid-April after the bears could not even drag the rate below 1.3200. Instead, it seems to be approaching the 1.3800 – level not seen since February, 2016. Explanations for the surge vary wildly, but the most widely accepted one is that the Looney is declining against the U.S. dollar, because of the looming housing crisis in Canada following the collapse of Home Capital Group Inc.

It makes sense from a news-following standpoint, but what we are interested in is whether the Elliott Wave Principle could have helped traders predict the rally earlier. The following chart of USDCAD was sent to clients ten days ago, before the market opened on April 24th.(some marks have been removed for this article)
elliott-wave-chart-usdcad 1h april 24th
The pair closed at 1.3505 on Friday, April 21st, but the point is that there was a complete five-wave impulse from the 1.3222 low. According to the theory, impulsive rallies are followed by three-wave declines. In addition, there was a bearish divergence between the highs of waves 5 and 3, suggesting “a decline of over 100 pips is highly probable.” Then, “as long as 1.3222 holds, targets above 1.3800 would be there for the taking.” Here is how the situation worked out. 
elliott-wave-chart-usdcad may 4
Eventually, the pair fell by just 95 to 1.3410, where it found support and took off again. The integrity of our invalidation level for this count at 1.3222 was never questioned by the market. The exact path to the north was hard to predict, but it is all well when it ends well.

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