The spot bounced off yesterday to the lower limit of its medium term bullish channel at 1.5830 and tests now the intermediate resistance of this one at 1.5940 suggesting a decline. However, a break of these levels will free a large potential and enable the upper limit of its channel at 1.6050.
Technical indicators do not provide clear signals but approach an overbuy zone suggesting a decline and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the superior band strengthens the intermediate resistance supporting the hypothesis of a violent movement in case of failure.
As the spot rate is currently testing the intermediate resistance of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell on the level of 1.5940 with the 1st objective at 1.5880 and then at 1.5860. A breakthrough of 1.5960 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” that’s means to buy the spot rate as soon as it is broken through its resistance of 1.5940 with the 1st objective at 1.6000 and then at 1.6020. A breakthrough of 1.5920 will invalidate this scenario.
