As we predicted yesterday, the spot rate bounced off to the intermediate support of its medium term bullish channel at 1.2560 and approaches now the upper limit of its channel at 1.2660 suggesting a decline. However, a break of these levels will free a large potential and initiate more violent bullish channel.

Technical indicators provide sell signals and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the superior band strengthens the upper limit of the channel supporting the hypothesis of a violent movement in case of failure.

As the spot rate is currently testing the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1.2660 with the 1st objective at 1.2600 and then at 1.2580. A breakthrough of 1.2680 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.2660 with the 1st objective at 1.2720 and then at 1.2740. A breakthrough of 1.2640 will invalidate this scenario.