USD/CAD is in a key decision zone and it will soon decide whether price is building a small bearish retracement for more uptrend continuation or whether a larger retracement is more likely in the coming days.
The article will review and discusses the expected price moves by using wave patterns, key trend lines, and SWAT software on the charts.
USD/CAD Building Wave 4 Correction
By going through the USD/CAD 4 hour chart and counting the waves, we can see that the pair has completed 3 waves and has now started its 4th wave correction. Corrections take place via ABC patterns and I think the price is about to start wave C…. but more confirmation is needed.
Here are the main points to put into consider:
- The end of wave C of wave 4 should not exceed 1.2730.
- Yesterday’s daily candle is a strong bearish candle.
- Traders should wait for a clear confirmation before trading wave C
- But waiting for wave 5 also makes sense.
So, from my perspective, maybe some more bearish momentum can take place before wave 5 actually does start, but we will discuss this issue by using SWAT software.
USD/CAD 4 Hour Chart Presents Divergence
USD/CAD 4 hour chart offers regular bearish divergence which means that the bearish direction is more likely for the moment and wave 4 is still in place.
Now it’s time to add the SWAT chart and figure out the potential setups available for USD/CAD.
Let’s discuss the two different scenarios the bearish presenting of wave 4 and the bullish the start of wave 5.
The bearish scenario: the continuation of wave 4 – high risk trades
- Wait for a strong bearish candle to break under the 21 EMA.
- Our target will be 1.2800 as first target and 1.2740 as the second target.
- And stop loss is 1.296821 above the last fractal.
The bullish scenario: presenting wave 5
- Wait for flag pattern and our entry will be breaking the flag trend line.
- Make sure that the price is above the 21 EMA.
- Our target will be – 27.2 and – 61.8 Fib levels