It’s been a little over five months since we published USD/CAD Bulls Are Waking Up. In that article we shared our big-picture outlook, assuming the pair should start rallying again in the face of wave (5) of III, which is supposed to climb above the previous top of 1.2835. The chart below shows how USD/CAD looked like five months ago.
As visible, we were expecting the pair to find support at the 38.2% Fibonacci level, where fourth waves typically end. Where is USD/CAD now? The chart below provides the answer.
The Fibonacci level did a good job discouraging the bears. The pair bottomed at 1.1919 and started rising sharply. On September 29th, the exchange rate reached as high as 1.3457. The bulls must be pretty pleased with this 1500+ pip rally. USD/CAD gave us another evidence of the Elliott Wave Principle‘s ability to predict large movements in the FOREX market. Now what?
As the chart shows, wave III is probably over, which means the recent decline to 1.3110 might be the beginning of something bigger. In our opinion, “buying the dip” is a risky strategy right now, since USD/CAD could already be in its wave IV to the south. If so, the pair might lose another 600 pips or even more.