As we predicted yesterday, the spot rate declined and reached its support at 1.2320. It made a rebound and approached the upper limit of its channel to 1.2380. A break of these levels would free up a significant potential and initiate a new trend.
Technical indicators do not provide clear signal 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. Moreover, the superior band strengthens the upper limit of its channel suggesting a more violent movement in case of break.
The spot rate tests its resistance that is why we recommend 2 scenarios: the first one suggests the probability of a decline, then we recommend a sell on the level of 1.2380 with the 1st objective at 1.2320 and then at 1.2300. A breakthrough 1.2400 will invalidate this scenario. The second scenario is the hypothesis of an exit of its channel; in this case we recommend a “buy stop”. We advise to buy the spot rate as soon as it is broken through its resistance of 1.2380 with the 1st objective at 1.2440 and then at 1.2460. A breakthrough 1.2360 will invalidate this scenario.
