USDCAD at First week Pebruary 2008

At this first week of Pebruary 2008, USDCAD is back below parity so naturally, traders are wondering whether the drop from 1.0378 is the beginning of a bearish leg that will test the November low just above .90. The short term pattern indicates that this is a possibility and we have identified a low risk entry point.

The pattern in the USDCAD since the November low at .9055 is either an A-B-C rally that will lead to a new low (under .9055) or a 1-2 (expanded flat) base that will lead to a strong rally to new highs (suggesting that a multi-year USDCAD low is in place). Either way, price will come below .9755. Potential support from Fibonacci is at .9652 and .9511. Be sure to visit the Elliott Wave forum for trading ideas and updates to this pattern.

The short term pattern is clear and indicates the bearish potential mentioned above. The decline from 1.0378 is clearly a 5 wave decline and the selective correction is underway now towards 1.0117 (former 4th wave), which is defended by the 50% at 1.0124. The next level of resistance is the 61.8% at 1.0184. Look for a top and reversal near these levels in order to position for a drop below .9755.