The spot rate has been testing since yesterday the intermediate resistance of its medium-term bullish channel at 1.2930 suggesting a decline. However, a break of this level will release a good potential and enable the upper limit of its channel at 1.2990.
Technical indicators provide sell signals and approach overbuy zone. Moreover, until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement. Furthermore, the superior band strengthens the intermediate resistance supporting the assumption of a violent movement in case of failure.
As the spot rate is currently testing the intermediate resistance 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 1.2930 with the 1st objective at 1.2870 and then at 1.2850. A breakthrough of 1.2950 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 of 1.2930 with the 1st objective at 1.2990 and then at 1.3010. A breakthrough of 1.2910 will invalidate this scenario.
