The spot rate has been testing since few days the upper limit of its medium term bearish channel at 1.3180 suggesting a decline. However, a break of these levels will free a large potential and initiate a violent bullish channel.
Technical indicators provide sell signals and 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 evolves on the levels of the spot rate supporting the assumption of a decline.
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 1.3180 with the 1st objective at 1.3120 and then at 1.3100. A breakthrough of 1.3200 will invalidate this scenario. The second scenario is a break of its resistance where we recommend a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.3180 with the 1st objective at 1.3240 and then at 1.3260. A breakthrough of 1.3160 will invalidate this scenario.
