The spot rate broke the upper limit of its medium-term bearish channel at 1.2820 leading to acceleration. A pullback on these levels is expected before a bullish trend is initiated.
Technical indicators provide sell signals supporting the assumption of a pullback in the short term. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the spot rate evolves on the levels of the superior band supporting the hypothesis of a violent movement in case of failure.
The spot rate is currently testing the upper limit of its channel, we suggest 2 scenarios. The first one is the hypothesis of a pullback where we recommend a buy on the level of 1.2820 with the 1st objective at 1.2880 and then at 1.2900. A breakthrough of 1.2800 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means to sell the spot rate as soon as it is broken through its support of 1.2820 with the 1st objective at 1.2760 and then at 1.2740. A breakthrough of 1.2840 will invalidate this scenario.
