**USD/CAD Technical Wave Analysis: Broader Market Context and Forecast**
*Originally analyzed by Gregor Horvat, adapted and expanded for educational purposes.*
The forex pair USD/CAD has recently exhibited notable price movements within the framework of Elliott Wave theory, a popular methodology used by technical analysts to forecast market behavior. By examining the recent price action and integrating broader market themes influencing the US Dollar and Canadian Dollar, traders can improve their decision-making process.
This in-depth, expanded analysis of USD/CAD builds upon insights originally offered by Gregor Horvat on Action Forex. It presents a comprehensive technical and fundamental perspective, integrating Elliott Wave principles with real-time macroeconomic considerations affecting both currencies.
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**Understanding USD/CAD: A Fundamental and Technical Overview**
USD/CAD, known as the “Loonie”, represents the value of the US Dollar measured against the Canadian Dollar. Several economic factors drive its movement:
– **Oil Prices**: Canada is a major exporter of crude oil. Rising oil prices typically bolster the Canadian Dollar, pushing USD/CAD lower, while falling oil prices can weaken the CAD, lifting USD/CAD.
– **Interest Rate Differentials**: The central bank policies of the Federal Reserve and the Bank of Canada (BoC) significantly influence USD/CAD. Expectations around rate hikes, inflation management, and economic data influence investor behavior.
– **Economic Indicators**: Data such as Canadian GDP, employment numbers, and US inflation or consumer confidence reports directly impact currency sentiment.
– **Risk Sentiment**: In times of global uncertainty, the US Dollar often catches a safe-haven bid, which can cause USD/CAD to rise.
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**Technical Analysis: Elliott Wave Framework**
Gregor Horvat’s original analysis applies Elliott Wave theory to forecast the USD/CAD trajectory. Elliott Wave theory postulates that market moves in repetitive cycles consisting of impulsive and corrective waves, often labeled as five-wave bullish or bearish cycles followed by corrective three-wave structures.
The current assessment of USD/CAD indicates a corrective Phase 2 retracement within a broader impulsive move.
**Key Takeaways from the Wave Count:**
– USD/CAD appears to be moving within a larger degree bullish trend that began from the 1.3116 low.
– The prior upward impulse may be categorized as Wave 1, which now seems to be undergoing a Wave 2 correction.
– This correction is expected to unfold in an A-B-C structure, a classic three-part corrective wave.
– The price recently bounced from the 1.3600–1.3640 zone, which could mark the end of Wave A or the initiation of Wave B within the larger correction.
– As per Elliott Wave standards, Wave 2 typically retraces around 50 to 61.8 percent of Wave 1, which aligns with the retracement zone seen in the 1.3600 area.
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**Detailed Wave Structure Breakdown**
1. **Wave 1**:
– Started from the low at 1.3116.
– Ended near the 1.3845 mark.
– This move was impulsive, suggesting a trend reversal or continuation.
2. **Wave 2 (Current Correction)**:
– Developing in an A-B-C correction.
– Sub-wave A possibly completed as price declined from 1.3845 to 1.3610.
– A bounce may develop into sub-wave B.
– Sub-wave C may continue to lower Fibonacci retracement levels or prior demand zones if bearish pressure continues.
3. **Projection Zones**:
– Major support sits near 1.3530–1.3570, which coincides with:
– The 50–61.8 percent Fibonacci retracement of Wave 1.
– A key structure zone established from May–June price action.
– Resistance remains near the 1.3780–1.3845 area, capping potential recovery unless broken to the upside
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