Yesterday the spot rate bounced off to the lower limit of its short term bearish channel at 1.2470 and is testing now the upper limit of this one at 1.2580 suggesting a decline. However, a break of these levels will release a good potential and initiate a bullish channel.
Technical indicators provide sell signals 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.
As the spot rate tests 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 1.2580 with the 1st objective at 1.2520 and then at 1.2500. A breakthrough of 1.2600 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 1.2580 with the 1st objective at 1.2640 and then at 1.2660. A breakthrough of 1.2560 will invalidate this scenario.