As we expected, on Friday the spot rate broke the intermediate resistance of its medium term bullish channel at 1.5980 leading to an acceleration. However, a pull back to these levels is expected before reach the upper limit of its channel at 1.6070.
Technical indicators do not provide clear signals but approach an overbuy zone supporting the assumption of a pull back in a short-term. 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 intermediate support of its channel, we suggest 2 scenarios: the first one is the hypothesis of a rebound where we recommend a buy on the level of 1.5980 with the 1st objective at 1.6040 and then at 1.6060. A breakthrough of 1.5960 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 1.5980 with the 1st objective at 1.5920 and then at 1.5900. A breakthrough of 1.6000 will invalidate this scenario.
