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Elliott Wave Charting
The commodity currencies traded higher in the past week due to higher gold and oil prices with moves towards $1100 per ounce and $76.00 per barrel.
4 Hour Cad/Oil Overlay
The 4h overlay chart below shows how tight the correlation between Cad/Usd (inverted Usd/Cad) and oil is now. Traders should always think about analyzing the oil chart, before making any decision on the Usd/Cad pair.
Based on the tight correlation between cad and oil, the team has decided to review a daily oil chart in order to analyze a possible move on Usd/Cad.
The daily chart below is showing a powerful rally from 83.90 to the 72.37 zone, which is called an impulse wave. This impulse wave, a blue wave I/A in our case, was reversed at 72.37, where a correction shown in the blue wave II/B has started.
The blue wave II/B is showing a possible scenario of a complex, expanded flat pattern, where prices of the wave B) have traded below the start of wave A), before wave C) turned higher towards the 76.00 resistance zone.
In an expanded flat pattern, wave C) usually completes below or around the top of a wave A), which means that a corrective blue wave II/B may be very near to its completion.
4 Hour Usd/Cad
The last trading day of the past week was bearish as prices were unable to break through a falling trend line from the 83.90 top. This could be a sign that a wave II/B correction is finished, and a lower wave III/C is ready to drive prices near the 69.00 and lower in the coming week. In this case, Usd/Cad could bounce higher from the 61.8% or 76.4% Fibonacci retracement levels, while the market trades above 1.0223.
Traders should also keep in mind that even if the wave C) leg of a wave II/B on oil has not been completed, and if prices drop to the 78.00 region, the overall view will remain bearish as long as the market trades below the 83.90 area.
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Disclosure: Long Usd/Cad