Some Words about CAD (EWA of USD/CAD)

One of possible variants of wave counting of CAD monthly chart is given in Figure1.

Figure 1. Wave counting on the monthly chart.

The fact that supposed wave (3) of [A] has already completed was discussed in the previous articles. Though CAD further movement did not always form in accordance with the forecasts.

At the moment CAD has reached strong resistance at 1.18, having bounced from strong support level at 1.10, thus we can suppose that the trend will reverse against the dollar in the nearest future. Let's consider this part of the chart on the weekly time-frame (Figure 2, below).

Figure 2. Wave counting on the weekly chart.

It can be clearly seen in this picture that supposed wave A or (4) has fulfilled the minimum requirements for the fourth impulse waves: the price has reached the upper edge of the channel, MACD has broken the zero line. By the way, note the divergence between the price and this oscillator for waves [iii] and [v] of 1 of (3) and for waves 3 and 5 of (3), which is an additional argument in favor of the current variant of wave counting.

At the same time the fact that the current depth of wave A or (4) (~19%) is not very deep can signal that correction is not completed yet. The depth of about 24% and less is more likely characteristic of the horizontal triangles or other extended corrections, which shape is often taken by the fourth waves of an impulse. Consequently, if uptrend assumes the shape of some zigzag construction, we may assume that only the first main wave A of (4) of correction is forming now, rather than the whole correction (4) completes.

Let's consider this part of the chart on smaller time-frames (Figures 3..6, below).

Figure3. Wave counting on the daily chart.

Uptrend, which has been forming from last summer, can be shown in the shape of uncompleted double zigzag. Several possible variants of the price further movement arise from incompleteness of the second supposed zigzag [y].

According to one of them final impulse (c) of the second zigzag [y] completes with diagonal triangle v of (c), forming now (Figures 3 and 4).

Figure 4. Wave counting on 720 min chart.

According to this variant ending of wave v of (c) of [y] and the whole double zigzag A? may be expected around 1.1825.. 1.1904.

Then price may fall to the lower edge of the trend channel, at 1.1450 (with further forming of upward triple zigzag A or (4)), or even below, to wave (3) ending (in the shape of wave B of (4)), refer to Figure 3.

Though according to one of the alternate variants current diagonal structure can be only wave iv of (с) of [y], which is assuming the shape of the skewed triangle (refer to Figures 5 and 6 below and article Skewed Triangles in the Forex market).

Figure 5. Wave counting on the daily chart.

In this case ending of wave v of (c) of [y] and the whole double zigzag A? may be expected at the following Fibo lines, e.g. around 1.2035..1.2159 (refer to Figure 6, below) or even above (not considered in the article).

Then parameters of the trend channel will be different (Figure 5).

Figure 6. Wave counting on 720 min chart.

I'd like to mention that the given analysis is guidelines only and is subject to change until supposed zigzag [y] completion is confirmed.

Addition on February 12, 2007

Figure 7. Wave counting on 720 min chart.

In several days ending of supposed second zigzag [y] formed at one of the calculated values at 1.1874.

Reference