The spot rate broke the intermediate resistance of its medium-term bearish channel at 1.5850 leading to acceleration. A pull back on these levels is expected before the upper limit of its channel at 1.5930 is reached.
Technical indicators provide sell signals supporting the assumption of a pull back in the short term. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement. Furthermore, the spot rate evolves on the levels of the superior band supporting the hypothesis of a violent movement in case of failure.
The spot rate is currently testing the intermediate support of its channel, we suggest 2 scenarios. The first one is the hypothesis of a pull back where we recommend a buy on the level of 1.5850 with the 1st objective at 1.5910 and then at 1.5930. A breakthrough of 1.5830 will invalidate this scenario. The second scenario is a break of its support where we advise a “sell stop” which means to sell the spot rate as soon as it is broken through its support of 1.5850 with the 1st objective at 1.5790 and then at 1.5770. A breakthrough of 1.5870 will invalidate this scenario.