The spot rate has been testing the intermediate resistance of its medium term bullish channel at 1.5950 for a few days suggesting a decline. However, a break of these levels will free a large potential and reach the upper limit of its channel at 1.6050.

Technical indicators do not provide clear signals but approach an overbuy zone suggesting a decline and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have greatly tightened in recent days showing a decline in volatility and the imminence of a violent movement. Furthermore, the superior band strengthens the intermediate resistance supporting the hypothesis of a violent movement in case of failure.

As the spot rate is currently testing the intermediate resistance of its channel, we suggest 2 scenarios: the first one is the hypothesis of a decline where we recommend a sell at the level of 1.5950 with the 1st objective at 1.5890 and then at 1.5870. A breakthrough of 1.5970 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.5950 with the 1st objective at 1.6010 and then at 1.6030. A breakthrough of 1.5930 will invalidate this scenario.