Canadian dollar sees two Elliott Wave scenarios — both bullish

USD/CAD has been in bearish mode since Friday, which means that move from 1.0243 was actually made only in three waves, so this rally is now part of a larger complex correction, either a flat or a triangle. For now we will focus on a triangle but need to see an evidence of a low around 1.0300 zone and rally back to 1.0468 to confirm idea of a contracting triangle.

USD/CAD-Triangle

 

On the other hand, if the pair continues straight down in impulsive fashion toward 1.0250 then we will be looking for a flat correction in red wave B where the pair can reach levels beneath 1.0240 and even around 1.0200 before bulls come back in view.

 In either case, both patterns are corrective and both suggest that USD/CAD just stopped in larger temporary pause and that sooner or later pair will turn bullish for 1.0650 maybe even 1.0700.

USD/CAD 4h Elliott Wave Analysis

 

What is a Triangle Pattern?

A Triangle is a common 5 wave pattern labeled A-B-C-D-E that moves counter-trend and is corrective in nature. Triangles move within two channel lines drawn from waves A to C, and from waves B to D. A Triangle is either contracting or expanding depending on whether the channel lines are converging or expanding. Triangles are overlapping five wave affairs that subdivide 3-3-3-3-3.

Contracting triangle

  • Structure is 3-3-3-3-3
  • Each subwave of a triangle is usually a zig-zag
  • Wave E must end in the price territory of wave A
  • One subwave of a triangle usually has a much more complex structure than others subwaves
  • Appears in wave four in an impulse, wave B in an A-B-C, wave X or wave Y in a double threes, wave X or wave Z in a triple threes

What is a Flat Pattern?

A Flat is a three-wave pattern labeled A-B-C that generally moves sideways. It is corrective, counter-trend and is a very common Elliott pattern.

Regular flat

• structure is 3-3-5 • wave B terminates about at the level of the beginning of wave A • wave C terminates a slight bit past the end of wave A • appears in wave two or four in an impulse, wave B in an A-B-C, wave X in a double or triple zig-zag, or wave Y in a triple threes

About the Author

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/

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