In our previous article about USDCAD, called “USDCAD And The Fibonacci Precision”, published on July 3rd, we suggested that “the rally still has some room to grow”. The pair was trading near 1.2560, when we wrote that. Our outlook remained bullish, because the wave structure of the price action did not seem finished at the time. Well, it does now, so here is an update.
As visible, the whole recovery since 1.1919 is in three waves. But right now, the most important thing is that its third leg has a complete five-wave impulsive structure. According to the Elliott Wave Principle, we should expect a correction in the opposite direction after every impulse. Furthermore, its fifth wave appears to be an ending diagonal. In our opinion, this is enough reason to expect a pull-back, which could take the USDCAD exchange rate back down to the support of 1.2560 or even lower.