Two weeks ago I wrote that the USD/CAD would likely see more downside in the weeks ahead. At the time of that writing the pair was trading at 1.3517 some 350 pips over the low that we saw last week at 1.3166. We are now approaching an area of key support that should be key in helping to give us clues as to where we are heading in this pair over the next several months. With the question at hand being was the January top in fact a major multi-year top in this pair or do will we yet see higher levels before we can consider this multi-year top in place.
Looking at the daily chart notice a few different things from a technical and Elliott Wave perspective that are giving us signals that we may be closing in on at least a temporary bottom. The first of which is that we have what we can consider a completed (or very close to completed) abc corrective pattern into the current levels. Now while on the smaller degree timeframes this corrective pattern would look slightly better with one more low we do technically have enough waves in place at the current levels to consider this move off of the January highs as a fully completed ABC. Also from a Fibonacci perspective we have already hit key target levels on the smaller degree timeframes and are approaching a very key larger degree Fibonacci support level at the 1.3013 level.
From a purely technical perspective we notice that the MACD on the daily chart is showing bottoming signs as well with the moving averages attempting to cross back over. The MACD on the four hour chart has also been showing signs of positive divergence for the majority of this move down off of the 1.4015 high giving us another signal that we may be forming at least a local bottom.
Zooming into the smaller degree time-frames I am counting the move off of the 1.3445 high as an Ending Diagonal. So with this being the case I would expect the reversal out of this Ending Diagonal to be quite swift and return sharply to the point of origin at the 1.3445 level. The fact that we have yet to see this sharp move off of this bottom is one of the reasons why at this point I am leaning towards seeing at least one more low prior to considering a local bottom being in place just yet. With that being said a move back over the 1.3396 level would be the first signal that we have made at least a local bottom in this pair with further confirmation coming with a break over the 1.3445 level.
