The spot rate approaches the lower limit of its medium-term bullish channel at 1.6040 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 1.6040 with the 1st objective at 1.6100 and then at 1.6120. A breakthrough of 1.6020 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 1.6040 with the 1st objective at 1.5980 and then at 1.5960. A breakthrough of 1.6060 will invalidate this scenario.
