Elliott Wave Analysis by EWF

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EURJPY Elliott Wave View: Ended 5 Waves Advance

EURJPY short-term Elliott wave view suggests that the decline to 124.87 low ended intermediate wave (2) pullback of a leading diagonal structure from 5/29/2018 cycle. Above from there, the rally higher is taking place as Elliott wave zigzag structure within intermediate wave (3) of a diagonal. In a zigzag ABC structure, lesser degree cycles should show sub-division of 5-3-5 structure i.e Minor wave A unfolds in 5 waves either impulse or a leading diagonal, Minor wave B unfolds in 3 swings corrective structure. Whereas Minor wave C unfolds in another 5 waves structure either impulse or Ending diagonal structure.

In EURJPY’s case, the rally higher from 124.87 low unfolded as 5 waves impulse structure in Minor wave A. Up from 124.87 the rally higher to 126.49 high ended Minute wave ((i)) in 5 waves structure. Down from there the pullback to 125.55 low ended Minute wave ((ii)) pullback. A rally higher from there to 130.275 high ended Minute wave ((iii)) with another lesser degree 5 waves structure. Below from there, a pullback to 129.55 low ended Minute wave ((iv)). Finally, a rally to 130.86 high ended Minute wave ((v)) & also completed Minor wave A. Currently Minor wave B pullback remains in progress in 3, 7 or 11 swings to correct the cycle from 124.87 low before the rally resumes, provided the pivot at 124.87 low stays intact. We don’t like selling it.

EURJPY 1 Hour Elliott Wave Chart

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Market Participants Betting on Nafta Deal between US and Canada

The Canadian Dollar strengthened to a two month high against US Dollar earlier this week. Market participants seem to bet on possible inclusion of Canada in a new Nafta pact. The U.S. has just concluded a successful bilateral talk with Mexico on Monday. Under the new agreement, cars need to have 75% of their content originate in the U.S and Mexico. The current Nafta requires 62.5% originate within North America. Under the new deal, 40-45% of auto content need to be made by workers who make more than $16 per hour, favoring the U.S. and Canada.

President Trump has threatened to put 25% tariffs on Canadian-made cars if a three-way deal can’t be reached. The major disagreement between Canada and U.S. is Canada’s insistence that the dairy supply management system is not open for negotiation. Trump has repeatedly said Canadian tariffs on some dairy products are unfair for U.S. producers. However, Prime Minister Trudeau on Wednesday has defended the supply management system that controls production of some Canadian farm products. The dairy issue is a difficult one for Prime Minister Justin Trudeau. The majority of domestic dairy industry is in Quebec and Ontario, and if they cave in the U.S. demands, they risk losing a lot of votes.

If a deal can be reached, the Bank of Canada can continue to focus on the domestic economy without worrying about trade disruption. Trump told reporters at White House on Wednesday that talks with Canada is going well. “They want to be part of the deal. And we gave till Friday and I think we’re probably on track.” Earlier this week Canadian Prime Minister Justin Trudeau said Canada is trying to reach agreement with the U.S. this week but won’t sacrifice its goal of getting the “right deal.” Talks with Canada should continue through the end of the week with aim to include Canada in trilateral deal. If the deal is successful, the Canadian Dollar may rally a lot further.

USDCAD Short Term Elliott Wave Sequence

USDCAD shows a 5 swing sequence from 6.28.2018 high, favoring further downside while rally stays below 8/13 high (1.3178). A 5 swing sequence is part of 7 swing WXY or also often referred to as double correction. The structure calls for further downside to 1.265 – 1.275 area as far as current rally in swing #6 fails below 1.3178. A successful outcome of the Nafta talk this week could cause pair to extend lower as the chart is calling.