USDCAD buying opportunity | 13 December 2022

When the EU oil ban took effect on 5 December, USDCAD experienced a sharp spike as investors shifted to a risk-off sentiment and the prospect for oil prices were dimmed. The price increase came to test the 1.35680 resistance zone, where a break above the resistance turned support level extended its bullish trend to the next resistance zone at 1.36850. The market was hesitant at this point and USDCAD came to test this resistance zone twice again, until China announced a significant easing of Covid-19 restrictions on 8 December which raised the prospect of increased oil demand, causing USDCAD to fall back down to the 1.35680 support level. Further declines in prices were halted and reversed when the US released stronger than expected inflation data on 9 December, boosting the prospect of Fed rate hikes. Prices were firmly pushed back up, but came to hover between the 1.36850 resistance zone and 1.36150 support zone. At the present moment, USDCAD has come to test the 1.36150 support zone which is our Entry, where we forecast a bounce back up to the 1.36850 resistance zone where we Take Profit. Dollar is forecasted by the Bank of America to be bullish in the short term up to Q1 2023, while falling oil prices are set to weigh the Loonie down, providing fundamental backing to our uptrend forecast.
Technicals support our bullish bias
-A bullish divergence between prices and Stochastic RSI indicates that prices are headed towards a bullish reversal
-Stochastic RSI has dipped and exited the oversold region
-ADX <25 which suggests that prices are ranging rather than trending. Hence, Stochastic RSI being in the oversold region represents a higher probability for reversal
-Price has exceeded the lower bound of the Bollinger Band, indicating oversold conditions