In this weekly chart, USDCAD has formed a strong bullish long-term price structure that targets >>$1.60 in the coming years (2-3). In circle, we note a major wave and until now there are 2 clear completed major waves, blue wave 1 and blue wave 2. The extension of these 2 waves gives us a possible blue wave 3 target, which is the 162% extension level at $1.5820. This major wave 3 needs 5 smaller waves to complete and USDCAD is actually in the last moves of wave A of the red wave (4) that might retraced 38% of red wave (3). (Described in the proceeding charts).
USDCAD Daily Wave Count
In this chart, we see one small fragment of the weekly chart, in particular the red wave (4). We have 3 clear downward moves (A-B-C) that are forming wave (A) of red wave (4). USDCAD needs to make a lower low towards the 100% extension level of waves A-B at $1.2970-$1.30 to fully complete 5 micro waves for wave C and to end the red wave (A).
After wave (A) has completed we expect at least a 50% retracement from the lows that will complete red wave (B) in the above chart. Possible targets for this wave are 50% and 62% retracement levels.
USDCAD 4h Price Outlook
In this smaller timeframe chart, we see the micro wave 4 of wave C shown in the second chart. We expect USDCAD to continue its upside momentum and make a higher high and possible find resistance at the red box, at $1.345 (38% retracement level of wave 3) or near $1.3500 (50% retracement level of wave 3). However, given the topping tails of the last 2 candles, it should not be surprising if the recovery stops at these levels (Fibonacci 23%) The downward channel will keep the price in a bearish momentum in the medium term until the red wave C of wave (A) has completed.
Trade Setup Scenario 1:
Short at 38% retracement level ($1.345 – ½ of position) and near 50% retracement level (<$1.3500 – ½ of position)
Stop loss = above the upper-bound of the channel.
Target = 1.2962
Trade Setup Scenario 2:
If 1.3334 is breached aggressively enter Short at market prices
Stop loss = 1.3405
Target = 1.2962