Title: USD/CAD Elliott Wave Analysis: Refined Forecast Suggests Fourth Wave in Place
Original concept by Gregor Horvat, FXStreet
Extended and adapted for educational purposes
Overview
The USD/CAD currency pair has recently captured the attention of traders and analysts due to its evolving Elliott Wave structure. According to the current wave count, a fourth wave correction may have concluded, setting up the pair for a potential fifth wave advance. This analysis dives deeper into the Elliott Wave principles applied to USD/CAD, elaborates on the current technical situation, examines potential scenarios going forward, and underscores key areas for traders to monitor. We’ll also supplement the original FXStreet article with additional insights from broader market trends and technical studies.
Understanding Elliott Wave Theory
Before diving into the actual charts and forecast, it’s helpful to briefly revisit Elliott Wave Theory:
– Elliott Wave Theory, developed by Ralph Nelson Elliott, postulates that markets move in repetitive cycles driven by investor psychology.
– These cycles include five-wave impulsive phases (moves in the direction of the larger trend) and three-wave corrective phases (retracements against the trend).
– The basic structure of a motive wave (up or down) contains:
– Wave 1: Initial movement
– Wave 2: Pullback retracement
– Wave 3: Often the strongest move
– Wave 4: A consolidation or correction
– Wave 5: Final push in the trend’s direction
– After the five-wave sequence, markets typically undergo a three-wave corrective structure (A-B-C).
Applying this model to USD/CAD offers strategic insight into price behavior and potential opportunities.
Current Technical Landscape
Based on the work by Gregor Horvat at FXStreet, the USD/CAD pair has recently completed a fourth wave consolidation and is now activating a potential bullish fifth wave. Here’s a deeper breakdown of the current technical situation:
Wave Count Review
– According to the Elliott Wave count in the 4-hour and daily timeframes, USD/CAD appears to be in a five-wave sequence that began with a low earlier in the year.
– The completed waves are:
– Wave 1: Built from the low near 1.3200, rising in controlled impulsive fashion
– Wave 2: A corrective pullback toward the 1.3400 level
– Wave 3: A sharp upward move reaching levels around 1.3550
– Wave 4: A corrective phase ending slightly above 1.3470
– The fifth wave anticipated is expected to take the pair toward or beyond the 1.3650 region.
Fibonacci Ratios and Support Zones
– Wave 4 respected key Fibonacci retracement levels, which helps validate the integrity of the wave count.
– Specifically:
– The 38.2 percent retracement of Wave 3 was around 1.3470, which coincided beautifully with support.
– Momentum indicators, such as the Relative Strength Index (RSI), maintained positive divergence during the 4th wave, further suggesting a correction within a bullish trend.
Patterns Supporting the Bullish Continuation
Several technical patterns complement the Elliott Wave count and support the case for a bullish fifth wave:
– Channel Rebounds: Price action during Wave 4 remained within a well-defined ascending channel that suggests continuation.
– Higher Lows Formation: As the price stabilized above 1.3470, a sequence of higher lows formed, confirming upward momentum.
– Break of Resistance: The move above 1.3550 marks a breakout from short-term consolidation, reinforcing bullish momentum.
What’s Next for USD/CAD: Key Price Levels and Scenarios
Taking stock of the wave count and technical signals, the next steps for USD/CAD can be outlined through two primary scenarios:
1. Bullish Continuation Toward Fifth Wave Target
– Price breaks 1.3580 cleanly and continues toward 1.3650–
Read more on USD/CAD trading.