USD/CAD - Watch for the Turn

We remain short the EURCHF (full position) and long AUDUSD (1/2 position). We took a small profit on the other half of the AUDUSD today.

We remain short the EURCHF (full position) and long AUDUSD (1/2 position). We took a small profit on the other half of the AUDUSD today. See the trade list below for the specific entry and exit points. We have been watching the USDCAD with great interest.

The decline from 1.4000 is in the shape of an ending diagonal (which means that the waves overlap). Ending diagonals are often fully retraced (in this case, 1.4000 would be a multi-year target). The support line from the ending diagonal is at 1.0385 this week, 15 pips from today?s low. This and speculative positioning as reported by the CFTC on the COT report has us looking for a turn. The link to last week?s COT report is below.

The very short term structure shows that an ending diagonal (on a very small scale) may have ended at 1.0400 this morning. The rally from 1.0400 is inspiring and the decline from 1.0477 is in 3 waves (so far), which might be a second wave correction. A rally through 1.0477 would confirm that either wave c or wave 3 is headed higher. We are therefore looking for a break above 1.0500 to get bullish against 1.0400. 1.0756 is a former 4th wave, which is our first target. We will watch the form of the advance and comment on possible objectives for target 2 at DailyFX+.

[B]JPercentile:[/B] Price is valued as a percentile, measured against the last 21 days (roughly 1 month of trading) for intermediate tops and 52 weeks (1 year) for major tops. Minor tops use either 60 minute or 240 minute charts and the input is 120 (which is 5 days and 20 days). Probability increases that the pair is nearing a top when the JPC indicator reads 100%. A reading of 0% indicates the potential for a bottom. Every top has a reading of 100% but not every reading of 100% is a top. Besides the percent reading we also need to see a turn out of the extreme level (ie. If it reaches 100%, we need to have it pointing downwards and vice versa) to determine whether this is a top or bottom. The box is only checked when we see a turn off of extreme levels in the JPercentile reading.
[B]Elliott Wave:[/B] Standard Elliott Wave Theory, the box is checked when we see a possible 5 waves complete or 3 waves complete (correction).
[B]Significant Support or Resistance Levels:[/B] The box is checked if we have important monthly pivots, or Fibonacci levels capping gains in topping scenarios or providing a support in bottoming scenarios
[B]Volatility:[/B] The box is checked if the currency pair has a volatility level below 8%. If a currency pair has a volatility that is too high, then it has a greater likelihood of experiencing swings that may not be as conducive for top or bottom picking because the potential of spikes could cause stops to be taken out prematurely.
[B]Risk Reversals:[/B] Risk reversal is the difference in volatility (delta) between similar call and put options (1 month, 25 delta in this case). The risk reversal rate is often extreme before market turns.