Feb. 6 (Bloomberg) -- The pound may weaken more than 3.5 percent against the dollar over the next month should it fall below a level of support, Societe Generale SA said, citing trading patterns.
Sterling may drop to $1.5170 after failing to advance through a level of resistance at $1.5885, technical strategists Hugues Naka and Fabien Manac’h in Paris wrote today in a report to clients. The U.K. currency strengthened about 2.8 percent over the past three weeks, and was down 0.4 percent at $1.5748 at 11:29 a.m. London time.
Should the currency drop below the key support level at $1.5635, it may decline to $1.5235 in two-to-three weeks and “could test the tentative support line of $1.5170” in about a month, Manac’h said today by phone.
The pound rose to $1.5883 on Feb. 1, the highest level since Nov. 18, according to data compiled by Bloomberg. Sterling last traded at $1.5170 in July 2010.
Support refers to an area where analysts anticipate orders to buy a currency and its related instruments. The stronger the support, the more selling is needed to fall below that level. Resistance is an area where sell orders may be clustered.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
--Editors: Daniel Tilles, Nicholas Reynolds
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