The spot rate approaches the upper limit of its medium-term bearish channel at 1.6230 suggesting a decline. However, a break of these levels will free a large potential and initiate a violent 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 strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
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 at the level of 1.6230 with the 1st objective at 1.6170 and then at 1.6150. A breakthrough of 1.6250 will invalidate this scenario. The second scenario is a break of its resistance then we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.6230 with the 1st objective at 1.6290 and then at 1.6320. A breakthrough of 1.6210 will invalidate this scenario.
