The spot rate approaches the lower limit of its medium-term bullish channel at 117.20 suggesting a rebound. However, a break of these levels will free a large potential and initiate a violent bearish channel.
Technical indicators provide sell 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 117.20 with the 1st objective at 117.80 and then at 118.00. A breakthrough of 117.60 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 117.20 with the 1st objective at 116.60 and then at 116.40. A breakthrough of 117.40 will invalidate this scenario.
