USDCAD--Is this a correction or what?

My two USDCAD longs were stopped out on Monday, incurring a loss of 59 and 76 pips respectively. The pair broke its uptrend line at 1.0548. RSI has moved to oversold. It has been moving downward since November 3d. Fie on the USD!

Do I still believe it may be basing? What I believe is that I made a case for it doing so over the last few weeks. I also took 944 pips off the table in profits while I was making this case. I won’t know for sure I was wrong until it drops and closes below 1.02. At that point, Timmy and Benji can make the case for why a weak dollar is good for the US. I will be happily shorting.

In my Elliott Wave (EW) analysis I posted last week, I wrote it couldn’t go below 1.0430. Below there would violate a rule that says wave four cannot enter into wave one’s territory. This morning’s low was 1.0433. Close, but not yet a cigar. Staying within EW guidelines, it’s still within the rules and guidelines for a zigzag correction and should be completing.

Looking back at the correction levels I posted last week (sans EW), the last one I considered “logical” was 1.0378. It’s not there yet.

I’m not sure I have the stomach for another long at this point but I’m thinking about it based on the very tight stop I can set if I want to believe my EW analysis as well as my last level of 1.0378. A close below here would point to a short. We’ll see. Here’s the 3-hour chart:

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.