After violent bullish movements these days, the spot rate has reached the upper limit of its medium term bullish channel at 1.2600 and declined. It seems now to return to its intermediate support at 1.2510 suggesting a rebound. However, a break of these levels will free a large potential and reach the lower limit of its channel at 1.2320.
Technical indicators are providing sell signals and evolving in overbuy zone supporting the hypothesis of a decline. 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 1.2600 with the 1st objective at 1.2540 and then at 1.2520. A breakthrough of 1.2620 will invalidate this scenario. The second scenario is a buy on the intermediate support where we advise to buy the spot rate at the levels of 1.2510 with the 1st objective at 1.2570 and then at 1.2590. A breakthrough of 1.2490 will invalidate this scenario.