Bloomberg News

Pound May Decline 9% in 3 Months, SEB Says: Technical Analysis

February 13, 2012

Feb. 13 (Bloomberg) -- The pound may weaken as much as 9 percent against the dollar during the next three months should it decline below a level of support, according to SEB AB, which cited trading patterns.

Sterling may drop to $1.44 should it fall below its 55-day moving average and to less than levels of key support at $1.52- $1.53, Stockholm-based chief technical analyst Anders Soederberg said today by phone. Britain’s currency strengthened 0.4 percent to $1.5820 at 11:13 a.m. London time. It has dropped 1.3 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies.

“If we manage to break out of the current range, we could rapidly end up at $1.44-$1.45,” Soederberg said today by phone.

The pound rose to $1.5929 on Feb. 8, the highest level since Nov. 15, according to data compiled by Bloomberg. The 55- day moving average is $1.5603, the data show, based on closing prices. Sterling last traded at $1.44 in June 2010.

A moving average is an indicator that displays the average value of a security’s price over a period of time. 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 through 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

To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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