The spot rate broke yesterday the upper limit of its medium term bullish channel initiating a more violent bullish channel and currently is testing the intermediate resistance of this one at 1.5930. A break of these levels will allow it to reach the upper limit of its channel at 1.6020.
Technical indicators provide sell signal 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 spot rate broke the superior band supporting the hypothesis of a break of its resistance.
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 1.5930 with the 1st objective at 1.5870 and then at 1.5850. A breakthrough of 1.5950 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 1.5930 with the 1st objective at 1.5990 and then at 1.6020. A breakthrough of 1.5910 will invalidate this scenario.