As we predicted yesterday, the spot rate has tested the upper limit of its medium term bullish channel at 1.5920 and declined. A return to the intermediate support of this channel at 1.5770 is expected. However, a break of these levels will release a good potential and reach the lower limit of its channel at 1.5590.
Technical indicators do not provide clear signals but approach and 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.
As the spot rate tests its resistance, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell on the level of 1.5920 with the 1st objective at 1.5860 and then at 1.5840. A breakthrough of 1.5940 will invalidate this scenario. The second scenario is a buy on the intermediate support where we advise to buy the spot rate on the levels of 1.5770 with the 1st objective at 1.5840 and then at 1.5860. A breakthrough of 1.5750 will invalidate this scenario.