On its daily time frame, forex Elliott Wave analysis on USD/CAD indicates that the pair is ready to resume its drop. A bearish divergence has formed, with stochastic making higher highs and price making lower highs. Once stochastic moves below the overbought zone, price might head further south.
Price is currently consolidating around the falling trend line on the daily time frame and the 38.2% Fibonacci retracement level. A higher pullback could lead to an actual test of the trend line or the 200 simple moving average, which can act as dynamic resistance for the pair.
Forex Elliott Wave Forecast
A larger correction could go all the way up to the 61.8% Fibonacci retracement level, which is in line with the 100 simple moving average and the former support area at the 1.0850 minor psychological level. If you’re planning to short this pair based on forex Elliott Wave analysis, you can set a stop beyond the 100 SMA or the 1.0850 mark.
Canadian CPI came in line with expectations during Friday’s release, with the core CPI showing a 0.1% decline and the headline figure reflecting a 0.1% uptick. Other data from Canada have shown signs of weakness though, as the latest jobs report showed a decline in hiring while the Ivey manufacturing PMI showed industry contraction.
Even the BOC has been less upbeat with its assessment, as Poloz acknowledged that inflation was just spurred by one-off factors such as the climb in oil prices instead of actual economic improvement. This puts the BOC in a less hawkish stance compared to other central banks.
Despite all this though, the Loonie might still continue to draw support from strong US data. After all, much of Canada’s exports go to the US and any pickup in the US economy could also boost the Canadian economy. Apart from that, the ongoing geopolitical tension could also spark stronger demand and rallies for oil, which is positively correlated to the CAD.
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