The spot rate broke yesterday the intermediate support of its medium term bearish channel at 98.30 leading to an acceleration. A return to lower limit of its channel at 97.80 is expected before a rebound to this level.
Technical indicators provide sell signals supporting the assumption of a return to its lower limit. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the inferior band evolves at the level of the spot rate supporting the assumption of a rebound.
As the spot rate approaches 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 97.80 with the 1st objective at 98.40 and then at 98.60. A breakthrough 97.60 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 97.80 with the 1st objective at 97.20 and then at 97.00. A breakthrough 98.00 will invalidate this scenario.
