The spot rate broke the intermediate resistance of its short-term bearish channel at 1.2270 leading to acceleration. A pull back is expected before reach of the upper limit of its channel - 1.2340. Moreover, the lowest point of Friday is a retracement of 64.8% of the rise between August 2 and 5, supporting the assumption of a pull back. However, a break through these levels will release good potential and reach the lower limit of its channel - 1.2230.
Technical indicators do not provide clear signals supporting the assumption of a pull back. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement.
If the spot rate tests its support, then we recommend 2 scenarios: the first one is the hypothesis of a pull back, then we recommend a buy at 1.2270 with the 1st objective at 1.2340, and further at 1.2360. A puncture of 1.2210 will invalidate this scenario. The second scenario is complementary of the first because it’s a “buy stop” when the spot rate will break the upper limit of its channel. We recommend to buy the spot rate as soon as it has broken through its resistance of 1.2340 with the 1st objective at 1.2400 and then at 1.2420. A breaking through 1.2320 will invalidate this scenario.