As we predicted on Friday, the spot declined and approached the intermediate support of its medium term bullish channel at 1.5770 suggesting a rebound. However, a break of these levels will release a large potential and enable to reach the lower limit of its channel at 1.5590.
Technical indicators do not provide clear signals but approach an overbuy zone supporting a decline but until the support is not broken, the assumption of a decline is most likely. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the spot rate evolves on the levels of the superior bands supporting the hypothesis of a decline.
As the spot rate tests its intermediate support, we recommend 2 scenarios: the first one is the hypothesis of a rebound where we suggest a buy on the level of 1.5770 with the 1st objective at 1.5830 and then at 1.5850. A breakthrough of 1.5750 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means selling the spot rate as soon as it is broken through its support of 1.5770 with the 1st objective at 1.5710 and then at 1.5690. A breakthrough of 1.5790 will invalidate this scenario.
