In our previous analysis on USDCAD we were expecting wave 5 to develop, once wave 4 is complete, probably in the form of a triangle. On the chart below you can see that the situation developed just as expected, with wave 5 reaching to a new top at 1.1276.
But what happened next? A fast and sharp decline by more than 400 pips back to 1.0856 for USDCAD. Could this drop-off be predicted? Yes, it could and it was, because according to the Elliott Wave Principle, triangles form before the final move of the trend of one larger degree. In our case this final move is wave 5, after which the uptrend should have been broken, at least temporary. Now, what we have is an impulsive five down for 1/A. This means that we have to prepare for a three-wave rally in wave 2/B and more weakness after it for wave 3/C, leading USD CAD near 1.0800 or even lower.
