picking tops and bottoms

-Short term bearish; support begins at 1.21 but deeper drop is probable
-Longer term; setting up for a rally to 1.40

For weeks I have focused on the triangle that is underway in the USDCAD.  Triangles unfold in 5 waves (a-b-c-d-e) and this one is in its final wave (wave e).  Initial support is at 1.21 but a deeper decline is likely.  E waves are often sharp moves and tend to test the triangle line (the line connected off of the bottoms of waves a and c).  Next Friday, the line crosses just below 1.18.  Be sure to check the Daily Technicals in the weeks ahead.  I will be looking for the bottom of wave e and completion of the triangle (which completes wave 4) in order to get bullish against 1.1459 for the ride higher in wave 5, which could reach 1.40 or higher.    

This shorter term chart shows the structure of wave d within the triangle.  Since the rally counts as a double zigzag, confidence is high that the advance is complete and that wave e is underway towards the mentioned levels.  Short term traders may wish to sell rallies against 1.2769 (price should stay below 1.2655 though).  Initial resistance is at 1.2431.

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals  every weekday morning (9 am EST), COT Analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.

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