Bank of America Merrill Lynch FX Strategy Research discusses USD/CAD outlook from a wave-analysis perspective, arguing the if an A-B-C correction is complete, the pair should see a rally towards 1.31-1.33 into Q1 2018 against wave (A) low around 1.2460.
"We think the wave structure of 5 waves up (12345) and 3 waves down (ABC) since the 2011 low is complete. We think the wave (C) decline ended at the 50% retracement with a head and shoulders bottom and a slight price vs RSI divergence.
The current bottom suggests spot will rally to retest the moving averages at 1.3165 and possibly the interior trend line at about 1.32-1.33 in 1Q18. A decline below the right shoulder would invalidate this view, which is about 1.2460 and wave (A) low," BofAML argues.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
