The spot rate bounced off to the intermediate support of its medium term bearish channel at 1.2290 and tests now the upper limit of this one at 1.2380 suggesting a decline. However, a break of these levels will free a large potential and initiate a bullish trend.
Technical indicators provide buy signal but are approaching overbuy zone supporting a decline and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have stabilized showing a more regular volatility. In addition, the upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
The spot rate tests its resistance that is why we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell on the level of 1.2380 with the 1st objective at 1.2440 and then at 1.2460. A breakthrough 1.2360 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance and here we advise a “buy stop”. We recommend to buy the spot rate as soon as it has broken through its resistance of 1.2380 with the 1st objective at 1.2440 and then at 1.2460. A breakthrough 1.2360 will invalidate this scenario.