The spot rate approaches the lower limit of its medium-term bearish channel at 1.2820 suggesting a rebound. However, a break of this level will free a large potential and initiate a more 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 stabilized showing a more regular volatility.
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 1.2820 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.
