The spot rate broke yesterday the intermediate resistance of its long term bearish channel at 1.5880 leading to an acceleration. It tests now the upper limit of this one at 1.6240 suggesting a decline. However a break of these levels will free a large potential and initiate a bullish channel.
Technical indicators provide buy but until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands have stabilized showing a more regular volatility. Furthermore, the superior band strengthens the upper limit of its channel supporting the assumption of a violent movement in case of failure.
As the spot rate is currently testing 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 1.6240 with the 1st objective at 1.6180 and then at 1.6160. A breakthrough 1.6260 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 1.6240 with the 1st objective at 1.6300 and then at 1.6320. A breakthrough of 1.6220 will invalidate this scenario.