Yesterday the spot rate bounced off to the lower limit of its short term bearish channel at 1.5760 and broke the intermediate resistance of this one leading to acceleration. It is testing now the upper limit of its channel at 1.5840 suggesting a decline. However, a break of these levels will free good potential and initiate a bullish channel.
Technical indicators provide sell signals and 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.
As the spot rate tests the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1.5840 with the 1st objective at 1.5780 and then at 1.5760. A breakthrough of 1.5860 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.5840 with the 1st objective at 1.5900 and then at 1.5920. A breakthrough of 1.5820 will invalidate this scenario.
