The spot rate broke the upper limit of its medium-term bearish channel at 1.6120 leading to the acceleration. A pull back on these levels is expected before a violent bullish trend is initiated.
Technical indicators do not provide clear signals but approaches overbuy zone supporting the assumption of a pull back in a short term. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement.
The spot rate is currently testing the upper limit of its channel, we suggest 2 scenario. The first one is the hypothesis of a pull back where we recommend a buy on the level of 1.6120 with the 1st objective at 1.6180 and then at 1.6200. A breakthrough of 1.6100 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means to sell the spot rate as soon as it is broken through its support of 1.6120 with the 1st objective at 1.6060 and then at 1.6040. A breakthrough of 1.6140 will invalidate this scenario.
