The spot rate tested the intermediate resistance of its medium term bullish channel at 1.5920 and declined. It approaches now the lower limit of its channel at 1.5830 suggesting a rebound. However, a break of these levels will free a large potential and initiate a bearish channel.
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 greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement.
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 at the level of 1.5830 with the 1st objective at 1.5890 and then at 1.5910. A breakthrough 1.5810 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 1.5830 with the 1st objective at 1.5770 and then at 1.5750. A breakthrough 1.5850 will invalidate this scenario.
