After breaking through the resistance of its bullish channel the spot rate made a pull back and is testing now the upper limit of the channel at 98.40 suggesting a decline. Nevertheless, a puncture of these levels will release good potential and initiate a more violent bullish trend.
Technical indicators evolve in overbuy zone supporting the assumption of a decline. 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 a break.
In case the spot rate tests its resistance then we recommend 2 scenario:
- The first one is the hypothesis of a decline, then we recommend a sell at 98.40 with the 1st objective at 97.80 and then at 97.60. A break through 98.60 will invalidate this scenario.
- The second scenario is the hypothesis of a break of its resistance, then we recommend a “buy stop”. We advise buy the spot rate as soon as it has broken through its resistance of 98.40 with the 1st objective at 99.00 and then at 99.20. A break through 98.20 will invalidate this scenario.