Last week we introduced USD/CAD as a market with further upside as the bullish pattern appeared incomplete. According to the Elliott Wave model, this pattern hinted to a resumption of the bullish trend after a dip in prices. Earlier on Tuesday, we received a dip in prices that was deep enough to satisfy the longer term model. As a result, we are positioned long with risk set to 1.2413.
The first target we are chasing is 1.2900 with a risk to reward ratio near 1-to-2. At that point, we will close half of the position and target 1.31 for a risk to reward ratio approaching and getting close to 1-to-3.
The Elliott Wave pattern we have spotted is a five wave impulsive wave to start a new trend. This pattern calls for a partial retracement lower, then another motive wave higher of similar size or Fibonacci proportions to the July 27 uptrend. This is how we establish 1.29 as our first target.
For this view to remain correct, price will need to remain above 1.2413.
To learn more about Elliott Wave theory, grab the beginner and advanced trading guide.
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Written by Jeremy Wagner, CEWA-M
Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to illustrate how Elliott Wave Theory can be used to identify potential patterns of trading opportunities.
For further study on Elliott Wave, watch this webinar recording on “Starting Your Elliott Wave Counting” where Jeremy uses the 5-3 pattern similar to the one noted above as a way to starting counts using EW. [Registration required]
Other recent articles by Jeremy:
AUD/USD Elliott Wave Analysis: Symptoms of a Top
Dow Jones Industrial Average Primed for Further Correction
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