After violent bullish movements of these days the spot rate is currently testing the upper limit of its medium term bearish channel at 1.2560. A break of these levels will release good potential and initiate a violent bullish trend.
Technical indicators provide sell signals and approach overbuy zone supporting a decline and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in a short term. Furthermore, the upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As the spot rate tests its resistance, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend selling at the level of 1.2560 with the 1st objective at 1.2500 and then at 1.2480. A breakthrough of 1.2580 will invalidate this scenario. The second scenario is the hypothesis of a break of its resistance where we advise a “buy stop”. We recommend to buy the spot rate as soon as it is broken through its resistance of 1.2560 with the 1st objective at 1.2620 and then at 1.2640. A breakthrough of 1.2540 will invalidate this scenario.