The wave from the October 31 high to the November 10 low appears to be a three wave zigzag pattern. This shifts the odds that any weakness may prove to be temporary. We still think the blue trend line will break, as the move higher is not carving in motive fashion. As a result, I suspect we are in a larger ‘b’ wave, which is a sucker’s wave.
A trader could view an opportunity to short on a technical break of the blue trend line. Look for this secondary down wave to be equal in length to the October 31 to November 10 down wave. This forecasts a target level near 1.2418-1.2571.
Why do a majority of traders lose? Find out in our traits of successful traders research.
From a sentiment perspective, the majority of traders are positioned net long and the number of long traders has abated. Sentiment is a contrarian tool so it provides us with a shorter term bearish signal for USD/CAD and medium term mixed signal. This implies a small dump in USDCAD so we will use the trend line break as our trigger.
Bottom line, USD/CAD appears to have a shorter term downward correction coming that may drive down towards 1.24-1.25.
Want to learn more about Elliott Wave analysis? Grab the Beginner and Advanced Elliott Wave guides and keep them near your computer.
---Written by Jeremy Wagner, CEWA-M
Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to help break down the patterns according to Elliott Wave theory.
Discuss this market with Jeremy in Monday’s US Opening Bell webinar.
Follow on twitter @JWagnerFXTrader .
Join Jeremy’s distribution list.
Other Elliott Wave forecasts by Jeremy: