USD/CAD Multi-Year Low Possibly In Place at 1.0470

The USD/CAD made 30 year lows this morning. Time to play a break…right? On the contrary, our analysis suggests that the USD/CAD is close to a multi-year low or has already put one in place. We cite specific levels to watch as well as the wave patterns that suggest a major reversal.

As we have focused on in the daily technicals (USDCAD at 30 Year Lows - 5 Year Decline Close to an End) in recent months, the USDCAD has been in the process of completing an ending diagonal from the May 2004 high at 1.4002, and therefore the entire leg lower from the 2002 high (1.6189). The decline is either close to complete or complete, which means that the next move is back towards the origination of the ending diagonal, which is 1.4000. This is a multi-year outlook. If the USDCAD were to extend to the channel support from the ending diagonal, then potential support would come in at 1.0400.

Zooming in to look at the 5th wave of the ending diagonal of the 5th wave of the larger decline from 2002, it is clear that there are 5 waves lower from 1.1879. However, the 5th wave could extend lower. A break above the previous 4th wave high at 1.0756 would strongly suggest that a bottom (possibly multi-year) is in place.

The very short term chart shows a 5 advance from 1.0470 this morning. A rally in 5 waves means that the trend of one larger degree is up. We expect a correction to unfold, likely during the first half of next week. The correction will offer an opportunity to get bullish against 1.0470. We will publish updates to this trade idea at FXCMTR as price action dictates (client access only).