The spot rate bounced off yesterday on the lower limit of its medium-term bearish channel at 1.2930. It tests now the upper limit of this one at 1.3010 suggesting a decline. However, a break of these levels will free a large potential and initiate a bullish channel.
Technical indicators provide buy signals but 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.
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 on the level of 1.3010 with the 1st objective at 1.2950 and then at 1.2930. A breakthrough of 1.3030 will invalidate this scenario. The second scenario is a break of its resistance then we advise a “buy stop” which means to buy the spot rate as soon as it is broken through its resistance of 1.3010 with the 1st objective at 1.3070 and then at 1.3090. A breakthrough of 1.2990 will invalidate this scenario.
