Amid good economic news from Europe and bad news about the U.S. unemployment, the spot rate rase significantly on Friday and is testing now the upper limit of its medium term bullish channel at 1.2830 suggesting a decline. However, a break of these levels will free a large potential and initiate a more violent bullish channel .
Technical indicators do not provide clear signals but evolve in overbuy zone and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in a short-term.
As the spot rate is currently testing the upper limit of its channel, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend a sell on the level of 1.2830 with the 1st objective at 1.2770 and then at 1.2750. A breakthrough of 1.2850 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means to buy the spot rate as soon as it is broken through its resistance of 1.2830 with the 1st objective at 1.2890 and then at 1.2910. A breakthrough of 1.2810 will invalidate this scenario.
