BLBG:Pound May Drop to 8-Month Low Versus Dollar: Technical Analysis
The pound may fall to $1.5489, its lowest level in more than eight months, after sustaining losses below its 200-day moving average, said Pak Lai Ng, a technical analyst at Forecast Pte, citing trading patterns.
The $1.5489 level is the 50 percent Fibonacci retracement of the pound’s advance from a low of $1.4231 reached on May 20, 2010 to a high of $1.6747 seen on April 28 this year, according to data compiled by Bloomberg. The currency’s moving average convergence/divergence, or MACD, “is still negative” and suggests it may weaken, Ng said yesterday. MACD is an indicator of daily momentum.
“The resistance is at $1.5870,” Singapore-based Ng said, referring to the high reached on Sept. 13. “Even if there’s a bounce, it will only be corrective. The downtrend is quite strong.”
The pound traded at $1.5665 as of 9:23 a.m. in Tokyo from $1.5705 in New York yesterday. It last touched $1.5489 on Jan. 10, when it dropped to as low as $1.5475. The currency declined below its 200-day moving average of $1.6129 on Sept. 5, when it fell to a low of $1.6062.
The MACD for the pound was -0.0158 today, below the signal line of -0.012, Bloomberg data show. A reading below the signal line indicates the currency may weaken.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level. Support refers to an areas where buy orders may clustered. Resistance is where there may be orders to sell.
MACD is calculated by subtracting the 26-day exponential moving average from the 12-day average. The signal line is a nine-day exponential moving average of the MACD, and provides buy and sell signals.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
