USDCAD at a moment of truth?

[Mercury]

Looks like this pair must now decide whether it will run up for another touch on the top of the retrace Triangle or break out in a Bearish move lower.  So far the retrace move has put 4 touches (5 is the classic but often 4 and a failed run up to a fifth can happen).  Big picture I remain with the EWT 3-4 retrace set up indicating a further leg lower to the Weekly trend wave 4 (purple).  The only question for me is whether the market is already in this leg lower or will make a higher top to Pink wave 4.

 

A look at Oil might help, is there a chance of a retrace soon?  Such a move down on Oil would likely boost USDCAD into a rally that would fit the scenario of staying within the Triangle for now and is that a double bottom I see on both 4 Hour and Hourly charts?

 



[Mercury]

Watch out for a fakeout on USDCAD or maybe just draw the lower Triangle line lower?  Something seems to be about to break on this cross and for me, at this point, it seems like a rally is more likely.  Check out Oil too.

 



[donaldprice]

Does appear that you may be on too something, however not too shore that this would be an impulse, rather a simple retrace to complete W4. I also have notice the possibility of B crude retrace, difficult however to decide on the 4hourly if we are having extensions on this W3, it does not look like an ending diagonal, all I have at present is an RSI and W3, but it terms of possible termination is yet to be confirmed.

 

[Mercury]

Almost certainly a rally would be the completion of a Wave 4 (Pink label on my chart) but should run as a Wave C (i.e. 1-5 subwaves) to a resistance zone and then turn for a final leg down to the larger timeframe Wave 4 (Purple).  At this point I would be expecting a large rally to a final market top (Purple 5).  If such a move were to coincide with a USD rally and then an Oil bear move then this would all stack.

 

There is a possibility that he Wave 4 Purple is already in and that this is a slow start to the final leg up, which would be propelled by a near term USD rally and Oil Bear drop.  Can't rule that out but in the short term I prefer the former set up. 

[Mercury]

BTW,  there is a big set of Canadian data coming out at 1.30 UK time, which could be a trigger.

[donaldprice]

In times of potential volatility and since I'm not in the trade, best allow for some price action to confirm this analysis, not disputing either, but I will probably reassess this to see a any similarities. Always best to reassess your chosen securities, never no what you missed lol.

[Mercury]

Similarly to other FX pairs there is an overnight price gap on this pair and currently the pair is retracing back towards closing of this gap.  Depending on Oil moves this could close and then rally away to complete the larger scale Triangle retrace before falling again.

 



[donaldprice]

Here we have limited price action and trapped in this triangle, however if we do head towards W-e and bounces of the T-line we could see this attempt to take out W-3 or possibly truncate, but we may know later today which way this market wishes to go.

 

[Mercury]

It is a challenging set up at present  and I wouldn't be very confident on it but for me the backdrop of USD weakness and Oil weakness are conflicting factors for this pair, resulting in the sideways actions.  I guess at some point one of those factors will be come dominant (possible temporarily) and result in a breakout.

 

I am wary of drawing Triangles that are too small and especially complex ones like you have on your chart.  On an hourly chart I am only interested to see ending formations and halfway signals(Flags/Pennants).

 

Here I think the larger time frame formations are holding sway (Daily retrace Triangle and the larger 4 Hourly is also a possible - see my chart below).  A retest of the Pink Triangle and upper blue line of the Daily chart Triangle looks probably.  A rebound brings up the scenario of a retrace back up to the upper Daily Triangle line, which would complete a complex pattern.  A break through the lower line and associate support zone brings up the move down to Wave 4 termination (as outlined previously).  The Former does not preclude the latter BTW, we could (and for my money probably will) get both.

 

Having said all that it could be that the W2 is done with the retest of the upper blue Triangle line (I have two possible positions for this Triangle) and so a break above the near term resistance zone would indicate a rally up to the 13300 area.  Whether you take anything here is purely a risk reward equation if you believe the upside is limited to 13300.

 

I think the bigger trade is to the Short side (in due course) so any Longs would be short term tactical and therefore more risky. 

 



[donaldprice]

Been looking at this pair, now and I could not help disagree with my original analysis, hence why counting the waves often helps discover the type of wave pattern that is in front of us. Because I still think their are doubts as to a hike in interest rates, not to mention that DX rally seems to be slowing again, I am questioning if $-cad is a complex triple zigzag and that we may be completing soon an abc within the x wave pattern. Please feel free if you have a different alternative view. Also noticed it is approaching the edge of the triangle which is also the 61% level.

[Mercury]

I see the 4 hour Triangle and have it also  and it could be a simple A-B-C with a subsequent break through that Triangle and a possible retest at Fib 62% as you suggest.  I do not recognise the inverted Triangle you have drawn in blue though.

 

There is also a smaller Triangle break on the downward move from that larger Triangle break complete with retest and bounce away into the current rally.

 

However if you look at the Daily chart the larger timeframe Triangle still holds and until the market breaks out of this formation we will not be clear on direction.  Regarding EWT a simple A-B-C retrace would have completed on 26/27 July (Red labels on my daily chart) but I would have preferred to see a clear 1-5 pattern on the wave C.  A more complex retrace is also evident in a series of A-B-Cs (brown labels on my daily chart).

 

Because the Daily Triangle is still in play and dominant and the wave C of the simple A-B-C is not in a 1-5 form and the move down from the simple C turning point is in an A-B-C also I prefer the complex retrace scenario that should conclude with a slightly higher high in the Daily Triangle.

 

Having said all that the best trading options here are on a break of the Daily chart Triangle Or a confirmed bounce back down off that Triangle top line and the Fib 38%.

 

 

[donaldprice]

I decided to look at an alternative wave count and after revisiting this again I have come to similar conclusions as you quite rightly highlighted is that the daily triangle is still in play.

[Mercury]

With Oil potentially at a tuning point into a rally (not yet confirmed) USDCAD could similarly be at a turning point back down.  This would be coupled with USD weakness of later, which if fueled by NFP later today would drive this pair down hard.  Currently there is a mirror small double top to the double bottom on Oil and strong Neg Mom Div supporting on the hourly chart.  This all at the Fib 76% off the July previous high.  A turn here means all my Daily chat EWTs shift to the left and the red set of labels come into play. with a Wave 4 completion at the July high.  This does not change my big picture road map heading down into a final leg to a large retracement turn.

 

NFP as always will be interesting.  A weak number would result in at least short term doubt over a USD rate rise likely resulting int he kind of short term USD weakness needed for the above scenario.

 



[donaldprice]

Because bad news is good news now across the indices and with the ever threat of a strengthening dollar, today we could if data is poor, see a good sell-off of dollar cad. It has early this morning bounced off a 50% FIB level on a daily from W2.



[Mercury]

We are coming up on my long held Wave 4 turning point at the top of the Triangle and Fib 38%.  With Oil continuing to retrace in what I believe is an A-B-C and likely to touch and bounce off support around 4400 I anticipate the Fib 38% will be a decent Short bet entry point.  Will be interesting to watch both of these markets over the coming days...

[donaldprice]

I had tried to re-analyse oil this morning and I also believe as stated in previous threads, that we have not completed the rertrace and therefore the 43-44 mark could be on the cards, although I would watch the previous support at 45.30.

[donaldprice]

Not to shore that we have completed W-E as of yet, as I am still concerned with the way oil is behaving at present. Although today was mostly more like short-covering, oil unfortunately appears that it still needs to retrace more for the present or at least appears that way. As with USD CAD, not 100% shore if we have seen the termination of W-C of W-E. Therefore I would not want to advocate short selling, but it certainly seems that may be on the cards if we reject the previous high or the triangle which would equate to bouncing of W1 bear trend of 38%.

 

[Mercury]

I agree that this pair has not yet reached a credible Shorting point .  For some time now I have been tracking this one up to a Wave B (pink label) retrace conclusion, which coincides with a Fib 38% retrace line and ascending Triangle line plus over bought RSI/Stochastic and Neg Mom Div signals on Daily and Hourly charts.  You can see from both the Daily and Hourly charts that the EWT labeling supports both a complex retrace and A-E Triangle (as you have it).  In addition the final wave C we appear to be in is following a steady 1-5 count, now in the final wave 5.  If we get a clear mini 1-5 count on this final wave up and a turn in the resistance zone then a Short is a decent bet.

 

Additionally a correlating reverse pattern on Oil would support this set up although we also have to consider USD.  Having said that this pair can go in opposition to other USD pairs due to the Oil factor.  This is similar in effect to USDJPY often being at odds with other USD pairs of late.

 

Initially I thought this was a 1-5 down and the current move was a 3-4 retrace but now I believe it is a Wave 4 down in A-B-C, which is likely to conclude at the noted support zone (see weekly chart) and be followed by a strong rally as USD rallies and Oil drops into its final wave down.

 



[Mercury]

Is USDCAD about to join USDJPY in the USD pullback?

 

A Head & Shoulders formation on the hourly chart is not usually a strong signal for me and a reversal could still occur with a final top up at the Triangle but often these retraces fall short and a break of the neckline offers a decent Short with stops just above the neckline.

 



[Mercury]

The USDCAD H&S formation is looking strong with an anticipatory Tramline break and retest signal also now backed up by a neckline break.  It seems to have all the hallmarks of a wave 3 down and with Oil rallying (pullback possible) and USD falling this pair looks set to follow USDJPY to a concluding large scale Wave 4 bottom some way down from current price.  Shorts are the order of the day here for a while to come.  In addition GBPUSD and EURUSD are looking like staging that rally I have been looking for, post the Yellen attack.  Will need to see this backed up tomorrow bu with stock indices rallying things are set fair for a while until the next crisis...

 

 

[Mercury]

One thing to watch out for on this pair and Oil  is that the current rally could be an EWT1-2 retrace after a Wave B conclusion.  An A-B-C form is currently possible (so is a 1-3 of 5 of course).  Similarly the sharp move down on Oil on Friday could be an A-B-C to complete a series of EWT1-2s (which is right is a very Bullish set up).  If we get a rally in Oil today this scenario could play out and if we see a turn between the Fib 76% and 88% on USDCAD hourly then that could be a decent Short opportunity (with close stops to guard against the alternative 1-5 wave C up to the top of the Triangle of course...

 

 

[donaldprice]

I would rather wait for this OPEC meeting to draw to a definitive conclusion Mercury, as their is going to be increased volatility and because their are 2 plausible scenarios at play i would want one of the w-counts to become invalidated. 

 

[Mercury]

Agreed  no definitive conclusion nor clear trend emergent just yet, only possible opportunities for low risk high reward ratio entries.  I went Long Oil this morning with a very close stop, only risking 25 points and now at B/E on the rally.  If it doesn't hold no loss, if it does...  Similarly with USDCAD a turn on the Fib 88% with a tight stop, depending on what Oil and DX is doing, could be a decent bet.  Ideally I'd like to see a rally to the Daily Fib 38% and the Triangle top line but how often does the market serve up the perfect set up?  Therefore I tend to trade several possible turning point until I get the right one, which costs a little in false entries but if I catch a major move gains me much more than it costs.

[donaldprice]

Sound strategy Mercury. It can some times come to trial and error before you get your entry right. Overall regardless of the outcome, i am medium term bullish on oil. But because of my strict entry requirements i will sit this one out for the time being. 

[Mercury]

Fair enough  and good to stick with those principles.  I am more interested in USDCAD than Oil at present, the Oil analysis is just to get a correlation is one exists.

[Mercury]

I have been tracking this pair for some time now and I feel it is close to a resolution of the long and complex retrace.  The question is whether the market has put in a top out or still has a bit to go.  Purist chartists would ideally like to see price touch the upper Triangle and also the Fib 38% (daily) but if I ask myself how often the ideal set up occurs in the markets I find that it more often over or under shoots the ideal.

 

Looking at the hourly chart I can see a potential top out of the retrace at Wave B (pink) after a 1-5 rally.  Wave B ends are very hard to pick and the likelihood of over/under shoot is higher in my experience.  The EWT count works, there is Neg Mom Div (and RSI/Stochastic for good measure), and I have a small tramline pair that has been broken and retested.  On the 4 Hourly and Daily you will see supporting set ups for this and on the Daily price has hit and turned back from the leading edge of a resistance zone.

 

I cannot rule out either another touch on the lower pink tramline or indeed a run up to the upper Triangle line area but a break below the short term support zone (marked on the hourly chart) would be a decent Short bet for me.

 



[Mercury]

Sometime it just work and this pair has just taken over from USDJPY as my favourite market to focus on for the next few weeks.  A perfect tramline break and double retest with a sharp bounce away as Opec "decide" to address supply.  Will that last?  I don't care.  For now the pair has shown it hand and I am nicely short all the way down.  Next stop will be the lower Triangle line and a break there ought to see 12000 as the final destination area before a strong rally as Oil turns and drops in it's final Bear move.

 



[Mercury]

Nice touch and rejection on the Fib 62% retrace with an A-B-C form, could be the conclusion of this retrace rally with a big move down to come.  Would like to see Oil also turn up so Fib 76% cannot yet be ruled out.  Still the risk/reward ratio is good with close stops just above Fib 62% and recent high point.

 



[Mercury]

Oil has just taken a little drop down and I have been anticipating this.  Could see it drop back to 5000 yet and that would give USDCAD the final push up to the Fib 38% and upper Triangle line after which?  Well let's see what happens later today with NFP...

 



[donaldprice]

I am seeing a similar pattern on Brent Crude. Because many are calling the NFP numbers to be crucial, I think we could see some wild swings between now and 1330pm today, but we could see a roll-over this afternoon if we see a spike in the DX.