The spot rate declined these days and broke the intermediate support of medium term bullish channel at 1.2560 leading to an acceleration. It tests now the lower limit of its channel at 1.2520 suggesting a rebound. However, a break of these levels will release good potential and initiate a bearish channel.
Technical indicators provide sell signals but approach an oversell zone and until the support is not broken, the assumption of a rebound is most likely. Bollinger bands are much discarded as a result of a strong decline these days. Furthermore, the inferior band strengthens the lower limit of the channel supporting the hypothesis of a rebound.
As the spot rate tests the lower limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a rebound where we suggest a buy on the level of 1.2520 with the 1st objective at 1.2580 and then at 1.2600. A breakthrough 1.2500 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 1.2520 with the 1st objective at 1.2460 and then at 1.2440. A breakthrough 1.2540 will invalidate this scenario.
