The spot rate approaches the upper limit of its medium-term bearish channel at 1.3710 suggesting a decline. However, a break of these levels will initiate a violent bullish channel.
Technical indicators provide buy signals, but the rate approaches overbuy zone supporting the assumption of a decline. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement.
The spot rate approaches the upper limit of its channel, we suggest 2 scenarios. The first one is the hypothesis of a decline where we recommend a sell on the level of 1.3710 with the 1st objective at 1.3650 and then at 1.3630. A breakthrough of 1.3730 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means to buy the spot rate as soon as it is broken through its resistance of 1.3710 with the 1st objective at 1.3770 and then at 1.3790. A breakthrough of 1.3690 will invalidate this scenario.
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