Elliott Wave Analysis: Ending Diagonal On USDCAD Indicates A Possible Reversal Lower In The Near-term

By: Gregor Horvat | Thu, Nov 24, 2016
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USDCAD has made a five wave of a decline from 1.4683 high which is a very strong evidence for a bearish trend. We are talking about black wave A/I, the first wave of this big new bearish cycle, followed by current slow and overlapping price movement that is either wave B or II. So we know that sooner or later downtrend will resume, but the question is from where. Well, based on recent price developments we see pair headed higher, into final blue leg C, after a triangle correction in blue wave B-circled had been recognized. Ideally this whole corrective rally since April will find a top and a turning point around the 1.3500-1.3880 area.

USDCAD, Daily

USD/CAD Daily Chart

Regarding the 4h chart, we can see that USDCAD has been trading higher for the last few weeks, especially since crude oil has turned south. On Loonie we see higher highs and higher swing lows but with overlapping price action between two converging trendlines so pair can be making an ending diagonal as shown on the 4h chart. That's a strong reversal pattern which could send price south this month, maybe already from around current levels as we see the ending diagonal in final stages, with red wave 5) midway through its completion.

Based on latest update, invalidation level is above 1.3700, as wave 3) must not be the shortest wave.

Divergence also indicates a possible reversal lower.

USDCAD, 4H

USD/CAD 4-Hour Chart

The ending diagonal is a special type of motive wave that occurs primarily in the wave 5 position when price has moved too far and too fast. Some ending diagonal triangles appear in the C wave of an ABC correction. In all cases, the ending diagonal terminates the move of larger patterns. They consist out of five waves, with each having three more sub-waves.

Basic Ending Diagonal:

Idealized Elliott Wave Basic Ending Diagonal

 


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Gregor Horvat

Author: Gregor Horvat

Gregor Horvat
www.ew-forecast.com

Gregor Horvat

Grega is based in Slovenia and has been involved in markets since 2003. He is the owner of www.ew-forecast.com, but before that he was working for Capital Forex Group and TheLFB.com. His feature articles have been published on: SafeHaven.com, FXstreet.com, Thestreet.com, Action forex, Forex TV, Istockanalyst, ForexFactory, Fxtraders.eu, Insidefutures.com, etc. He recently won the award on FXStreet.com for Best Forex Analysis in 2016. At www.ew-forecast.com he helps clients and educate them about the Elliott wave prinicple and how to label and track unfolding patterns in real time.  His approach to the markets is mainly technical. He uses a lot of different methods when analyzing the markets such as candlestick patterns, MA, technical indicators etc. His specialty however is Elliott Wave Theory which could be very helpful especially if you know how to use it in combination with other tools/indicators.

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