USD/CAD Elliott Wave: Fourth wave in place

Executive summary

• Wave ((iv)) completion: Wave ((iv)) wrapped up on Friday at 1.3924 leading to wave ((v)) lower.
• 5th wave: Wave ((v)) would be the ending wave of the larger downtrend pattern that began February 3.
• Downside target: Next trend appears lower in wave ((v)) possibly reaching 1.3426.

Current Elliott Wave analysis

Back on June 19, 3 days after wave ((iii)) finished, we forecasted a rally to 1.3914 in wave ((iv)).

The rally trended to 1.3924 last Friday, August 22, then reversed.

The reversal highlights the end of wave ((iv)) and wave ((v)) is in the early stages of a downtrend trend.

Wave ((iv)) appears to have carved an (a)-(b)-(c) flat pattern where wave (c) was an ending diagonal pattern, a rising wedge type of pattern. 

There were a lot of wave relationships appearing near 1.3914. First, the 38.2% Fibonacci retracement level sits there. Second, a broken trend line from 2021 passes through the price zone.

With USDCAD now breaking below the support trend line of the ending diagonal pattern, we can confidently suggest that the top is in place for wave ((iv)).

This implies an Elliott wave 5th wave lower that likely targets 1.3426. Using the Fibonacci extension tool, wave ((v)) would be 100% to wave ((i)) near 1.3426. Also, there is a September 2024 swing low near there at 1.3419 (not shown).

Bottom line

USD/CAD finalized wave ((iv)) on Friday and is declining in wave ((v)). We anticipate wave ((v)) to reach near 1.3426. If 1.3924 is broken to the upside, then we’ll consider other alternate wave counts.