The spot rate approaches the lower limit of its medium-term bullish channel at 105.50 suggesting a rebound. However, a break of these levels will free a large potential and initiate a violent bearish channel.
Technical indicators do not provide clear signals, but until the support is not broken the assumption of a rebound is most likely. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement.
The spot rate is currently testing the lower limit of its channel, we suggest 2 scenarios. The first one is the hypothesis of a rebound where we recommend a buy on the level of 105.50 with the 1st objective at 106.10 and then at 106.30. A breakthrough of 105.30 will invalidate this scenario. The second scenario is a break of its support where we recommend a “sell stop” which means to sell the spot rate as soon as it is broken through its support of 105.50 with the 1st objective at 104.90 and then at 104.70. A breakthrough of 105.70 will invalidate this scenario.
