The spot rate broke yesterday the intermediate resistance of its medium-term trading range leading to acceleration. It tests now the upper limit of this one at 1.6270 suggesting a decline. However, a break of these levels will release good potential and initiate a bullish channel.
Technical indicators provide buy signals but approach an oversell zone supporting the hypothesis of a decline. 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 at the levels of the spot rate supporting the assumption of a decline.
The spot rate is currently testing the upper limit of its trading range, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend a sell at the level of 1.6270 with the 1st objective at 1.6210 and then at 1.6190. A breakthrough of 1.6290 will invalidate this scenario. The second scenario is a break of its resistance where we recommend a “buy stop” which means to buy the spot rate as soon as it is broken through its resistance of 1.6270 with the 1st objective at 1.6330 and then at 1.6350. A breakthrough of 1.6250 will invalidate this scenario.
