The spot rate has tested yesterday the upper limit of medium term bullish channel and demonstrated a decline. It is currently testing now the intermediate support of its channel at 98.10 suggesting a rebound. However, a break of these levels will free a large potential and reach the lower limit of its channel at 96.40.
Technical indicators provide buy signals and approach overbuy zone supporting a decline and until the support is not broken, the assumption of a rebound 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 upper band strengthens the upper limit of its channel supporting the hypothesis of a violent movement in case of failure.
As the spot rate tests its support, we suggest 2 scenarios: the first one is the hypothesis of a rebound where we recommend a buy on the level of 98.10 with the 1st objective at 98.70 and then at 98.90. A breakthrough of 97.90 will invalidate this scenario. The second scenario is the hypothesis of a break of its support where we advise a “sell stop”. We recommend to sell the spot rate as soon as it is broken through its resistance of 98.10 with the 1st objective at 97.50 and then at 97.30. A breakthrough of 98.30 will invalidate this scenario.
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