The spot rate broke yesterday the upper limit of its medium term bearish channel at 1.2370 leading to acceleration. It has initiated a medium term bullish channel and is testing now the upper limit of this one at 1.2490. A break of these levels will free an important potential and will initiate a more violent bullish channel.
Technical indicators provide sell signals and approach an overbuy zone supporting a decline. Until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in short term. Furthermore the upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As the spot rate tests its resistance, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1.2490 with the 1st objective at 1.2430 and then at 1.2410. A breakthrough 1.2510 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance where we advise a “buy stop”. We recommend to buy the spot rate as soon as it is broken through its resistance of 1.2490 with the 1st objective at 1.2550 and then at 1.2570. A breakthrough 1.2470 will invalidate this scenario.
