As we foresaw yesterday the spot rate retraced from the intermediate support of its medium term bearish channel at 1.2270 and is testing now the upper limit of this one at 1.2380. It seems to initiate a decline. However, a break of these levels will free a large potential and initiate a violent bullish channel.
Technical indicators provide buy signal but are approaching 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 these days. Stabilization is expected in a short term.
The spot rate testing its resistance, then we recommend 2 scenarios:
- the first one is the hypothesis of a decline, then we recommend a sell at the level of 1.2380 with the 1st objective at 1.2440 and further at 1.2460. A break through 1.2360 will invalidate this scenario.
- the second scenario is the hypothesis of a break of its resistance, then we recommend a “buy stop”. We recommend to buy the spot rate as soon as it has broken through its resistance of 1.2380 with the 1st objective at 1.2440 and then at 1.2460. A breaking of 1.2360 will invalidate this plan.