USD/CAD: Will the Gap Close?USD/CAD Market Commentary: Will the Gap Close?
The USD/CAD pair has recently exhibited strong bullish momentum, breaking out from a prolonged consolidation phase. Current price action suggests an impulsive Elliott Wave structure, with a potential completion of wave (3) and an ongoing corrective wave (4) before a final push higher into wave (5).
Wave Structure and Triangle Formation
Upon closer examination, the previous correction appears to have formed a WXY combination ending with a triangle consolidation, a classic Elliott Wave pattern that often precedes a powerful thrust in the direction of the dominant trend, which explains the strong thrust currently observed after its completion. This aligns with the guideline that price action breaking out of a triangle tends to be sharp and decisive. The recent breakout into wave (3) supports this expectation, suggesting a bullish continuation in the near term, with an expected target range around 1.4900-1.4950.
Will the Gap Close?
A notable feature of the current price action is the untested gap left behind at lower levels, approximately 1.4500-1.4550. Historically, the forex market tends to seek efficiency, meaning that unfilled price gaps often become liquidity targets over time. However, the current wave structure suggests that USD/CAD is likely to complete its 5-wave impulse first before reversing into a deeper correction.
Technical Outlook
Bullish Case: The strong breakout from the triangle indicates that USD/CAD may continue its upward trajectory towards 1.4900-1.4950 before encountering significant resistance.
Bearish Case: After completing wave (5), the market may transition into a broader corrective phase, potentially forming an ABC retracement that could drive price downward to close the gap around 1.4450-1.4400.
Conclusion
Given the strong thrust from the Y-wave triangle completion and wave-based projection, USD/CAD is likely to experience further upside before any meaningful correction. However, once wave (5) reaches exhaustion, traders should be prepared for a possible retracement that seeks to fill the gap. The key levels to monitor are:
1.4900-1.49500: Potential exhaustion point of the uptrend.
1.4450-1.4550: Gap target and potential support zone.
Traders should watch for signs of trend exhaustion near resistance, such as bearish divergence or a lower high formation, which could signal the start of a deeper pullback toward the gap closure.
This structured outlook provides a roadmap for navigating USD/CAD’s price action in the coming sessions.
