The spot rate has tested yesterday the intermediate resistance of its medium-term bearish channel at 1.6230 and declined. It tests now the lower limit of its channel at 1.6160 suggesting a rebound. A break of these levels will free a large potential and initiate a more violent bearish channel.
Technical indicators do not provide clear signals but evolve in oversell zone supporting the hypothesis of a rebound. Bollinger bands are much discarded as a result of a strong decline these days. Furthermore, the spot rate evolves at the level of the inferior band supporting the hypothesis of a rebound.
As the spot rate is currently testing the lower limit of its channel, we suggest 2 scenarios: the first one is the hypothesis of a rebound where we recommend a buy at the level of 1.6160 with the 1st objective at 1.6220 and then at 1.6240. A breakthrough of 1.6140 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 1.6160 with the 1st objective at 1.6100 and then at 1.6080. A breakthrough of 1.6180 will invalidate this scenario.
