The pound’s 50-day moving average against the dollar may signal the British currency is stabilizing amid a pickup in risk appetite, according to CMC Markets. The U.K. currency strengthened to $1.520 as of 1:43 p.m. in London, from $1.4269 yesterday. It earlier rose to $1.4605. The gains “dissipated at $1.46, which is below the 50-day moving average of $1.4630,” Ashraf Laidi, chief market strategist at CMC Markets in London, wrote in an e-mailed report today. “A possible sign of gradual stability in sterling is that the only four times in which pound-dollar has closed above its 50-day moving average since August of 2008 were this month and in January.” The pound tumbled 26 percent versus the dollar in the past 12 months as the Bank of England cut interest rates to a record low to revive an economy battered by the global credit crisis. It dropped 16 percent against the euro. “The fact that sterling has continuously fallen at each downturn of risk reflects the lack of confidence in follow- through bids,” Laidi also wrote. Should the pound climb above the 50-day moving average of $1.4630, the next level of so-called resistance is at $1.4820, he said. The British currency will find so-called support at $1.4210, with the next level at $1.4050, Laidi wrote. Resistance is the upper boundary of a technical trading range, with support representing the lower limit. Charts of moving averages, which smooth out daily gains and declines in asset prices, are used by technical analysts to indicate market trends and provide buy and sell signals.

Source