The spot rate is currently testing the intermediate support of its medium term bullish channel at 1.5770, but the bad news about the British economy could lead to a breach of this support and could return the currency pair to the lower limit of its channel at 1.5590.
Technical indicators do not provide clear signals, 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 at 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 of 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 if 1.5790 will invalidate this scenario.
