USDCAD bulls proved how stubborn they could be by lifting the pair to a one-year high, despite the numerous bearish interventions along the way. During the last month, USDCAD has been slowly progressing in a choppy and overlapping manner as U.S. – Canada relations took a turn for the worse following the G7 summit. The pending NAFTA renegotiation as well as the looming global trade war threat have also been taking their toll on the Canadian dollar.
But traders did not need to constantly follow all the politics, because the Elliott Wave Principle apparently managed to put them a month ahead of the news. The chart below was sent to our subscribers on May 16th. While USDCAD was trading near 1.2860, the path to 1.3150 was already marked like a trail in the forest.
From an Elliott Wave point of view, there was one simple reason to stay bullish. There was a five-wave impulse from 1.2247 to 1.3125, followed by a corrective decline to 1.2527 on April 17th. These two patterns formed a 5-3 wave cycle after which the trend was supposed to resume in the direction of the impulsive sequence and eventually exceed the top of wave “a”.
The problem was that the recovery from 1.2527 to 1.2998 looked like a three-wave pattern, which eliminated the possibility of another five-wave impulse developing in the position of wave “c”. The only motive wave, whose sub-waves can have a three-wave structure is the diagonal and since we were talking about a C-wave here, an ending diagonal was expected to form. Therefore, staying bullish as long as USDCAD trades above 1.2527 made sense as waves 3, 4 and 5 had to lift the pair to a new high in wave “c”. The updated chart below shows how things went.
Wave 3 took the pair to 1.3067 on June 5th. The very next day USDCAD plunged sharply to 1.2856 in wave 4 to overlap the top of wave 1. This means that if this count is correct, wave 5 of “c” has been in progress during the last ten days. The exchange rate climbed to 1.3154 today, thus exceeding the top of wave “a” and reaching its month-old target. While the world has been paying close attention to geopolitical news and politicians’ comments on different topics, USDCAD Elliott Wave analysts had a road map to guide them.
What will USDCAD bring next week? That is the subject of discussion in our next premium analysis due out on Sunday! In case you want to learn doing it yourself, our eBook Elliott Wave guide is there to help!