“We should prepare for more USDCAD strength from now on. Levels around 1.26 or higher should not be surprising.” This is an excerpt from “USD/CAD To Regain Positive Bias?”, which was published on June 10th. In that article, the Elliott Wave Principle suggested we should expect a significant recovery in USD/CAD, since there was a nice 5-3 wave cycle on its hourly chart. You can see it on the chart below.
According to the theory, every impulse is followed by a three-wave correction. After that, the trend resumes in the direction of the five-wave sequence. Nothing else was needed to form our bullish expectations. As long as the invalidation level of 1.1919 was safe, we had to stay long. Here is how USD/CAD has been developing since the forecast was published.
As visible, the exchange rate did not start rising immediately. Instead, the correction extended lower to touch the 61.8% Fibonacci level. However, the bullish count remained valid, so we were still bullish. USD/CAD bottomed at 1.2127, which gave the start of the anticipated recovery. Yesterday, the pair reached as high as 1.2632. The outlook remains bullish, since the rally still has some room to grow. That is why, in our opinion, the Wave Principle is so valuable. It tells you when to expect reversals and when you are wrong. And as long as your “wrong level” stays untouched, you are right.