The spot rate broke on Friday the intermediate resistance of its medium term bearish channel at 98.30 leading to an acceleration to the upper limit of this one at 99.00. It declined and tests now the intermediate support of its channel at 98.30 suggesting a rebound. However, a break of these levels will free a large potential and reach the lower limit of its channel at 97.80.
Technical indicators do not provide clear signals but until the support is not broken, the assumption of a rebound is most likely. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the inferior band strengthens the lower limit of the channel supporting the hypothesis of a return to these levels.
As the spot rate approaches its support, we recommend 2 scenario: the first one is the hypothesis of a rebound where we suggest a buy on the level of 98.30 with the 1st objective at 98.90 and then at 99.10. A breakthrough 97.10 will invalidate this scenario. The second scenario is a break of its support where we advice a “sell stop” which means selling the spot rate as soon as it i broken through its support of 98.30 with the 1st objective at 97.70 and then at 97.50. A breakthrough 98.50 will invalidate this scenario.
