The spot rate is actually testing the lower limit of its medium term bullish channel at 98.20 and testing the upper limit of its short term bearish channel at 98.70 at the same time. A break of its resistance will allow it to reach the upper limit of its channel and a break of its support will release a large potential and initiate a violent bearish channel.
Technical indicators do not provide clear signals but until the support or the resistance is not broken, no real movement is detected. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement. Furthermore the inferior band strengthens the lower limit of its channel supporting the hypothesis of a violent movement in case of failure.
As the spot rate tests its support, we recommend 2 scenarios: the first one is the hypothesis of a break of its resistance where we suggest a “buy stop” as soon as it is broken through its resistance of 98.70 with the 1st objective at 99.30 and then at 99.50. A breakthrough of 98.50 will invalidate this scenario. The second scenario is the hypothesis of a break of its support where we advise a “sell stop”. We recommend to sell the spot rate as soon as it is broken through its support of 98.20 with the 1st objective at 97.60 and then at 97.40. A breakthrough of 98.40 will invalidate this scenario.
