The spot rate approaches the intermediate resistance of its medium term bearish channel at 111.30 and seems to initiate a decline. However, a break of these levels will free a large potential to reach the upper limit of its channel at 112.00.
Technical indicators provide buy signals but, until the resistance is not broken, the assumption of a decline 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 intermediate resistance of its channel, so we recommend 2 scenarios: the first one is the hypothesis of a decline, then we recommend to sell at the level of 111.30 with the 1st objective at 110.70 and then at 110.50. A break through 111.50 will invalidate this scenario. The second scenario is a break of its resistance, then we recommend a “buy stop”, which means to buy the spot rate as soon as it has broken through its resistance of 111.30 with the 1st objective at 111.90 and then at 112.10. A break through 111.10 will invalidate this scenario.
