USDCAD bulls must be having a good time. The pair has been adding pips faster than a speed train in the last three trading weeks, climbing from 1.3080 on December 14th to almost 1.3600 as of today. Unfortunately for us, this is not going to be one of those articles, where we explain that the Elliott Wave Principle managed to prepare us for what happened next. Truth is, that on December 12th, we thought USDCAD is headed much lower. We were, however, expecting a short-term recovery first. The chart below, which we sent to clients before the markets opened that day, shows why.(some marks have been removed for this article)
As visible, we thought that a five-wave impulse has been in progress, whose wave (iv) of 3, in our opinion, was supposed to begin soon. Since fourth waves usually retrace back to the 38.2% Fibonacci level, we assumed that USDCAD is likely to touch 1.3300, before the downtrend resumes. The MACD was also showing a bullish divergence, thus supporting the positive outlook. Two days later, on December 14th, the Fed announced its decision to raise rates by 25 basis points, which led to this:
By the time we had to sent the next premium analysis to clients, USDCAD was already trading above 1.3300. The good thing is that the rally was not a surprise. The bad news is that the count was ruined by its speed and size. That is why, on December 19th, we sent our clients the updated chart above. According to that analysis, as long as 1.3080 was safe, USDCAD was likely to continue to the north and exceed the top at 1.3588.
Which it just did. An excellent example of the fact that the Wave Principle might help you, even if your initial idea was wrong, by simply preventing you from making a bad decision in the short run. In this case, by preventing us from joining the USDCAD bears below 1.3200 in the first place and allowing us to turn bullish later on. Just enough.
What to expect from now on? What is the bigger picture saying? Is USDCAD going to continue even higher or the resistance near 1.3600 would turn out to be too strong for the bulls to breach? Prepare yourself for whatever is coming. Order your Elliott Wave analysis due out every Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.