As we expected yesterday, the spot rate made a pull back on the intermediate support of its medium term bullish channel and approached the upper limit of this one at 1.2670. A break of these levels will release good potential and initiate a more violent bullish channel.
Technical indicators do not provide clear signals but approache overbuy zone 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 spot rate evolves at the levels of superior band supporting the hypothesis of a decline in short-term.
As the spot rate approaches the upper limit of its channel, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend a sell at the level of 1.2670 with the 1st objective at 1.2610 and then at 1.2590. A breakthrough of 1.2690 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” that means to buy the spot rate as soon as it is broken through its resistance of 1.2670 with the 1st objective at 1.2730 and then at 1.2750. A breakthrough of 1.2650 will invalidate this scenario.
