The spot rate is currently testing the lower limit of its medium term bullish channel at 1.6190 suggesting a rebound. However, a break of these levels will free a large potential and initiate a bearish channel.
Technical indicators do not provide clear signals but until the support is not broken, the assumption of a rebound 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 inferior band strengthens the lower limit of the channel 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 1.6190 with the 1st objective at 1.6250 and then at 1.6270. A breakthrough of 1.6170 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 1.6190 with the 1st objective at 1.6120 and then at 1.6100. A breakthrough of 1.6210 will invalidate this scenario.
