As we expected yesterday, the spot rate bounced off to the intermediate support of its medium term bullish channel at 1.2880 suggesting a decline. However, a break of these levels will free a large potential and initiate more violent bullish channel.
Technical indicators provide sell signals and evolve in overbuy zone. Moreover, 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 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 at the level of 1.2880 with the 1st objective at 1.2820 and then at 1.2800. A breakthrough of 1.2900 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance at 1.2880 with the 1st objective at 1.2940 and then at 1.2960. A breakthrough of 1.2860 will invalidate this scenario.
