Since yesterday the spot rate is testing the intermediate resistance of its medium term bullish channel at 97.50 and is likely to initiate a decline. A break of these levels would allow reaching the upper limit of its channel at 98.80. However, a decline would allow reaching the lower limit of its channel 96.20.
Technical indicators provide buy signals but approach overbuy zone supporting the assumption of a decline, but until the resistance is not broken, the hypothesis 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, superior band strengthens the intermediate resistance supporting the assumption of a violent movement in case of break.
The spot rate tests its resistance, for this reason we recommend 2 scenarios: the first one is the hypothesis of a decline, then we recommend a sell on the level of 97.50 with the 1st objective at 96.90 and then at 96.70. A breakthrough 97.70 will invalidate this scenario. The second scenario is the hypothesis of an exit of its channel, and then we recommend a “buy stop”. We advise to buy the spot rate as soon as it has broken through its resistance of 97.50 with the 1st objective at 98.10 and then at 98.30. A breakthrough 97.30 will invalidate this scenario.