The spot rate has tested the upper limit of its medium term bearish channel at 1.3060 and declined. It approaches now the lower limit of this one at 1.2960 suggesting a rebound. However, a break of these levels will free a large potential and initiate a more violent bearish channel.
Technical indicators provide sell signals but evolve in oversell zone and until the support is not broken, the assumption of a rebound is most likely. Bollinger bands are much discarded as a result of a strong decline these days. Furthermore, the spot rate evolves at the levels of the inferior band supporting the hypothesis of a rebound.
As the spot rate is approaching the lower limit of its channel, we suggest 2 scenario: the first one is the hypothesis of a rebound where we recommend a buy at the level of 1.2960 with the 1st objective at 1.3020 and then at 1.3040. A breakthrough of 1.2940 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means to sell the spot rate as soon as it is broken through its support of 1.2960 with the 1st objective at 1.2900 and then at 1.2880. A breakthrough of 1.2980 will invalidate this scenario.
