USDCAD fell from 1.3793 to as low as 1.2061 in a little over 4 months. This means the U.S. dollar lost a total of 1732 pips against the Canadian counterpart, or 433 per month on average. In the Forex world this selloff could easily qualify as fast and sharp. So while the pair was trading near 1.2330 two weeks ago, common sense dictated traders should simply stay with the downtrend and sell the rally. Unfortunately, this strategy, despite its numerous benefits, does not always work, especially if you decide to join the old trend just when it is about to reverse.
In this case, sell the rally did not work quite well in USDCAD, since the pair is already in the vicinity of $1.2600. Thankfully, the Elliott Wave Principle was there for us. The hourly chart of the pair, given below, was sent to subscribers before the market open on Monday, September 25th.
By itself, this chart would not tell us much. However, when combined with the weekly, daily and 4-hour charts of USDCAD, which were also included in the premium analysis, it managed not only to prepare us for the upcoming rally, but also provided a specific stop-loss level at 1.2252, thus reducing the risk and allowing us to take advantage of the situation.
We thought the bottom at 1.2061 was the end of a (b)-wave to the south, which in turn meant an impulsive wave (c) to the north should be expected. By September 25th, the recovery from 1.2061 did not look as a complete five-wave impulse, so we assumed more strength should follow as wave (c) progresses. Two trading weeks later, here is how the hourly chart of USDCAD looks today.
Two things become obvious. First, the pair did not rise as fast as we hoped. Staying with the bulls took a lot of patience as the market made one step back for every two steps forward. But what counts is the second obvious thing: that USDCAD trades roughly 250 pips higher today, than it did two weeks ago. In the end, all traders had to do was “stay long unless 1.2252 gives up.“