close icon

USDCAD Two Months Ahead of Bank of Canada

Last week, the Bank of Canada raised the interest rate for the first time in seven years, thus reinforcing the downtrend in USDCAD, which has been in progress since the top at 1.3793 in May. In this respect, the hike itself is hardly the reason for anything. Despite the fact that the U.S. dollar lost over 200 pips more against the Canadian counterpart after the news, that decline was in the direction of a price move, which has been in progress for over two months already. On the other hand, on May 8th, when the rate hike was not even a rumor, we sent the following daily chart of USDCAD to subscribers. It shows how not only the post-hike drop, but the entire decline from roughly 1.3800 could have been predicted with the help of the Elliott Wave Principle.
usdcad may 8 elliott wave analysis
For most people, a price chart is something that simply visualizes the price movement and is useless for anything else. But to Elliott Wave analysts, the price chart of a financial instrument is much more important, because it helps us recognize the repetitive price patterns the market uses to reveal its intentions. In USDCAD’s case, back in early May, the daily chart of the pair allowed us to see that the decline between 1.4690 and 1.2460 was a five-wave pattern, called an impulse. The theory states that every impulse is followed by a three-wave correction in the other direction. As visible, the following recovery to 1.3793 took the shape of a W-X-Y double zig-zag retracement with a triangle in the position of wave X. And finally, wave Y terminated slightly below the 61.8% Fibonacci level.

Two months ago, any skilled Elliott Wave analyst could conclude that both the wave cycle and the Fibonacci level were suggesting USDCAD should be expected to reverse to the south for a significant selloff. The updated chart below shows what you already know.

usdcad july 18 elliott wave analysis

USDCAD is currently trading around 1.2630. The pair is down by almost 1200 pips from the May high and is already approaching the previous major bottom at 1.2460. Waiting for the BOC to finally hike rates before joining the bears would have meant missing out on most of the selloff. Fortunately, the Wave principle put us ahead of the news once again. In that case, two months ahead.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Crude Oil and USDJPY Ruled by One Pattern

Everything was going so well for USDJPY and crude oil bulls until last week, when both the exchange rate and the WTI crude price made sharp bearish reversals. Oil fell from as high as $72.88 to $67.40 a barrel, while USDJPY plunged from 111.40 to 108.95. Normally, the media tried to explain the selloffs with…

Read More »

USDMXN Precisely Followed Its Elliott Wave Path

It has been almost four months since we last wrote about USDMXN. On January 30th, the pair was hovering around 18.70, following a sharp selloff from 19.90 to 18.30. The good news was that instead of wondering what the Dollar-Mexican Peso exchange rate was going to do next, we managed to recognize a very reliable Elliott…

Read More »

GBPAUD On a Slippery Slope Towards 1.53

If you take a look at how GBPAUD has been doing between October 2016 and March 2018 you might think Brexit never happened. The British pound rallied from as low as 1.5322 to 1.8509 against the Australian dollar, gaining almost 21% in those 18 months. As of this writing, the pair is hovering around 1.7720,…

Read More »

USDZAR Facing Elliott Wave Resistance Near 13.00

USDZAR, the ticker symbol of the U.S. Dollar – South African Rand Forex pair, is not among the ones we regularly cover. However, we are constantly looking for article material, so when a client asked us if we could take a look at it, we told him – no problem. The only thing we needed…

Read More »

EURCAD Bulls Setting Up a 400-Pip Recovery?

The European currency has had a tough time recently, losing ground against major rivals like the U.S. dollar and the Japanese yen. Here we are going to examine the Euro’s drop against the Canadian dollar, which has been in progress since March 20th, when EURCAD climbed to a multi-year high of 1.6153. The last time…

Read More »

EURUSD: The Evolution of an Elliott Wave Count

Less than three months ago, on February 16th, the EURUSD pair climbed to a three-year high of 1.2556. Given the fact that Euro bulls have been in control during the entire 2017, it made sense to expect more strength from the European currency against the U.S. dollar. In addition, after four months of negotiations, in…

Read More »

AUDUSD: A Bearish Omen Half a Century in the Making

AUDUSD climbed to 1.1079 in July 2011 and has been steadily declining ever since. In mid-January 2016, the pair fell to as low as 0.6826 and as of this writing it is still in the doldrums, hovering around 0.7560. After a 38% crash in less than five years, one might think it is time for…

Read More »

More analyses