In our previous analysis of USDCAD, published almost a month ago, we said that “we can prepare for a significant recovery in the near future”. The wave structure of the decline USDCAD went through was not impulsive, so we thought it was corrective. In fact, it seemed like an A-B-C zig-zag. That is why we came up with the following labeling.
As visible, we assumed that wave C is over and the recent bounce was the start of the anticipated larger recovery. As a consequence, we did not expect the bears to test 1.1945 again. We were wrong about that. They did test it again. Twice. Both times without success. See the chart below.
As you can see, the bottom we thought was going to be the last one, turned out to be just wave “i” of an ending diagonal for wave 5 of C. These developments made the situation difficult to trade, but did not change the overall count at all. So, when wave C was finally over at 1.1919, the bulls returned with a bang. Now, USDCAD is flying in the vicinity of 1.2550. More importantly, the recent recovery has a five-wave structure. According to the Elliott Wave Principle, chances are that USDCAD is going to disappoint this week, because every five waves are followed by a correction in the opposite direction. In our opinion, now does not seem to be the best time to add long positions. Wave 2/B to the south is supposed to begin soon. Better wait for it.
