The spot rate is currently testing the lower limit of its medium term bearish channel at 1.2880 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 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 spot rate evolves on the levels of the inferior band supporting the hypothesis of a rebound.
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 1.2880 with the 1st objective at 1.2940 and then at 1.2960. A breakthrough of 1.2860 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 1.2880 with the 1st objective at 1.2820 and then at 1.2800. A breakthrough of 1.2900 will invalidate this scenario.
