As we expected yesterday, the spot rate broke the upper limit of its short term bearish channel at 98.40 and reached the upper limit of its medium term bullish channel at 99.20 suggesting a decline. However, a break of these levels will release good potential and will initiate a more violent bullish channel.
Technical indicators provide sell signal and approach overbuy zone supporting a decline. Until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase these days. Stabilization is expected in a short term. Furthermore, the upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure
As the spot rate tests its resistance, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell on the level of 99.20 with the 1st objective at 98.60 and then at 98.40. A breakthrough 99.40 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance where we advise a “buy stop”. We recommend to buy the spot rate as soon as it is broken through its resistance of 99.20 with the 1st objective at 99.80 and then at 100.00. A breakthrough 98.90 will invalidate this scenario.