The spot rate broke the lower limit of its medium-term trading range at 105.80 leading to acceleration. A pull back on these levels is expected before a violent bearish channel is initiated.
Technical indicators provide sell signals supporting the assumption of a pull back in the short term. Bollinger bands are much discarded as a result of a strong decline these days. Stabilization is expected in the short term. Furthermore, the spot rate evolves on the levels of the inferior band supporting the hypothesis of a violent movement in case of failure.
The spot rate broke the lower limit of its channel, we suggest 2 scenarios. The first one is the hypothesis of a pull back where we recommend a sell on the level of 105.80 with the 1st objective at 105.20 and then at 105.00. A breakthrough of 106.00 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means to sell the spot rate as soon as it is broken through its resistance of 105.80 with the 1st objective at 106.40 and then at 106.60. A breakthrough of 105.60 will invalidate this scenario.