The last time we wrote about USDCAD, it was hovering around 1.29, after a decline from 1.3125. In a video, published on March 28th, we demonstrated how Elliott Wave traders got ahead of the bearish reversal that occurred a week earlier. Two weeks later now, the bulls are yet to find a way to fight back as the pair continues to plunge. The good news is that this selloff, too, could have been predicted with the help of Elliott Wave analysis. The chart below was sent to subscribers before the market open on April 2nd.(some marks have been removed for this article)
As visible, the outlook was very negative. A five-wave decline from 1.3125 to 1.2815, labeled i-ii-iii-iv-v, suggested that more weakness should be expected as long as the invalidation level at 1.3125 remained intact. So instead of “buying the dip” ten days ago, we thought USDCAD is a lot more vulnerable than it appeared at the time. The chart below visualizes the pair’s path since.
Wave “c” of the three-wave recovery could not even reach 1.30, not to mention the invalidation level at the top. 1.3125 was too far away for the bulls to reach and soon after USDCAD touched 1.2944, it fell under bearish jurisdiction again. On April 11th, it fell to as low as 1.2545. News-followers would probably explain the slide with the weaker-than-expected U.S. non-farm payrolls data released on April 6th and the fact that Canadian job creation was significantly higher than anticipated. In addition, U.S. consumer inflation dipped -0.1% in March.
However, Elliott Wave analysts did not need to pay much attention to all these reports or wait for them, because the hourly chart of USDCAD had already positioned the pair for a major selloff by drawing a 5-3 wave cycle to the downside. An eye for wave pattern was all that was necessary to recognize the bearish setup several days in advance.
