USD/CAD: Strong recovery approaches key Fibonacci resistance

Gregor Horvat Wavetraders

USD/CAD is recovering quite aggressively as crude oil pulls back, while the US Dollar has broken significantly higher after the Fed raised rates. Looking at the price action, we are clearly dealing with a stronger recovery here, but it could still be a counter-trend move within the broader USDCAD structure.

However, with the US Dollar strengthening across the board, this recovery could extend a bit further. We are watching the 61.8% Fibonacci resistance at 1.4052, followed by 1.4127. This is an important resistance zone where we would expect the upside to start slowing down.

A new reversal back into the channel, followed by a break below 1.3900, would provide stronger confirmation that USDCAD is turning lower again. The near-term invalidation level based on the updated wave structure is at 1.4248.

From a basic Elliott Wave perspective, a bearish structure typically develops as a five-wave decline, labeled waves 1, 2, 3, 4, and 5. Waves 1, 3, and 5 move in the direction of the larger trend, while waves 2 and 4 are corrective rebounds.

bearish setup — Basic Elliott Wave Bearish Setup Formation

Once the five-wave decline is completed, the market can enter an ABC correction in the opposite direction. This three-wave recovery is typically labeled waves A, B, and C and can retrace part of the previous five-wave decline before the larger bearish trend resumes.

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Author

Gregor Horvat

Wavetraders

Experience Grega is based in Slovenia and has been in the Forex market since 2003.

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