The dollar/Canada pair (USDCAD) has shown some good strength lately and is close to testing the upper trendline of a large degree price channel.

If we get a break above this line that holds, this channel will then become a basing channel line and price will likely continue to move higher in wave 3 of (3). Figure 1 shows a potential path for the Intermediate wave (3) rise on a weekly chart.

Editor’s note: For those who are new to Elliott wave theory, Madden has written a comprehensive exclusive article series here on TraderPlanet. Get started here.

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The daily chart shows the internals of the price action off the 0.96327 higher swing low. The expanding leading diagonal is a rare pattern but I found it to be the best fit for Minor wave 1 here (Also note that expanding leading diagonals are more common in currency markets than in any other). Notice how price broke above the basing channel for waves 1 and 2 at minor degree. It is common for price to use the channel’s trendline for support or resistance once getting above or below it before accelerating higher or lower in the third wave.

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When analyzing currency markets it is good practice to monitor the futures contract also. In Figure 3 the price action is inverse to the dollar cross which can help look at things a little different at a quick glance. On this chart I am monitoring a bearish head and shoulders pattern that has been triggered but is still a nice bit off the patterns measured move. This is an example of how to use traditional technical techniques with a specialized methodology such as the Wave Principle.

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The Canadian Dollar has a positive correlation to the price of Crude Oil so again it is good practice to be aware of what is happening in both markets. The chart below shows both the Canadian Dollar and Crude to be both trending lower but crude appears to be lagging on the most recent move. If we get the breakout in USDCAD as shown above I would expect Crude to make new lows also.

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Read another article on using Elliott wave by Madden here:
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