On the daily chart of the U.S. dollar/Canadian dollar (USD/CAD) currency pair, we can see a bigger bearish impulse in the making since the end of April of 2017. A strong impulsive sequence is in the making with the first two waves already completed. A current sharp fall from the start of June looks like a Blue Wave three in progress, that can touch levels near the 1.2000/1.2050 region and makes a new temporary recovery into the following wave four. Once the following wave four unfolds, a new push lower into Blue Wave five may follow.
On the 4-hour chart we have a better look at the structure, away from the previous Red Wave 4) correction. This structure is impulsive and strong in nature, which indicates a final Wave 5) in progress. Wave five must be constructed by five sub-waves, meaning that even more weakness may follow on the pair before a new change in trend comes our way. That said wave five can also be constructed by three sub-wave, but this occurs only in ending diagonal patterns.
An ending diagonal pattern:
All that being said, at the moment we see the price making a little rally, which can start of a minor correction of Black Wave 4. Ideally, the current correction will unfold a three-wave move with potential resistance to come in around the former wave four at the 1.2241 level. From the mentioned region a new drop can follow.
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