If you need to review my overall FULL analysis on this pair, see this post: "REPOST: FULL ANALYSIS: USDCAD: Selling? CONSIDER THIS! under Related Ideas section.
Before I start talking about what I see happening, here's the so you can see what I am referring to
My current wave count has this recent drop as only the possible wave 2 of a possible Wave (3) that could be happening now. If correct, then the end of this wave 2 will follow with the beginning of a wave 3 of (3). Which could be pretty strong but short due to the deepness of this possible wave 2.
There are several other possible wave counts that would also be valid but I'm not going to illustrate them here. But one thing that those other wave counts have in common with the one I am showing here is that they also are calling for a wave UP to occur next. Whether it is a wave 3 as I am showing or some other wave up, there's going to be a move up. It's just a matter of determining what kind of wave up it is going to be and if it is tradeable.
I've drawn a POTENTIAL on the DAILY TF. Let me explain about this as it may be controversial. This , according to the rules of a , is ONLY a when looked at on the DAILY TF. On the , you can see that the B point clearly does not close below .618 retrace of the XA leg. But if you were to go to a lower TF, you will see that prices clearly do close below the .618 retrace of XA. So what gives?
This phenomenon does occur more often than you think. But here's my guideline on this: the higherr TF always has more importance than the lower TF. So in this instance, this for me is valid.
On the main chart above in the 4Hr TF, I have also drawn in a POTENTIAL pattern that is close to completion. This pattern also sets up a POTENTIAL pattern. Although this pattern is a , it does not necessarily signify any possible reversal. It could but is not definite. We'll have to wait and see what PA does when/if it gets there. It could just mark the end of a wave 1 of the wave 3 I'm showing.
Anyway, the pattern will complete right near the .707 retrace of wave 1 within the G-Zone. I've also laid out the AB extensions of the and they all lie within the G-Zone. Interestingly enough, the POTENTIAL I identified on the DAILY TF completes almost EXACTLY at the .886 retrace of that same wave 1's G-Zone. Confluence? Or coincidence?
MY TRADE PLAN
I am waiting to see what happens when prices fill the . Must wait and see if it will drop further to reach the D point of that DAILY or not. If it does, and I see the PA, I will take a LONG position as I am expecting that the next move up may be a wave 3 of the wave (5) up. Or at the very least, we will see prices go back up and retest the highs and that .618 MONTHLY retracement.
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Please keep in mind that I am not giving any trading signals or trade calls here. Only providing my own trade thoughts for your benefit and insight as to my trading technique and style. Please don't ask if you should or should not take the trade or ask for stop loss and take profit levels. Any SL or TP given on my trades are my own I have used for my trade and are not recommendations for you to use. If you are not sure, then you do not have a trading plan for yourself in place. I suggest you make one before you continue to do any trading!
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