Pound May Fall Against the Dollar, BNP Paribas Says: Technical Analysis

The pound may extend its decline against the dollar and test a key support level at $1.5125 after surveys showed “deteriorating dynamics” in the U.K. housing market, BNP Paribas SA said.

“The pound-dollar has broken back below initial support at the $1.5445 level returning the focus to the $1.5375 recent lows,” analysts in London led by Hans-Guenter Redeker, BNP Paribas’s global head of foreign-exchange strategy, wrote in a research note today. “A break below here will leave the pound vulnerable to a decline towards the channel support at $1.5200 and then support at $1.5125.”

The Bank of England today said U.K. mortgage approvals were little changed in July, signaling the housing market remains sluggish as the government implements the biggest budget squeeze since World War II. Pressure on house prices and equity markets have driven down the appetite for risk, limiting the possibility of a sterling rebound and “providing renewed selling opportunities,” the BNP analysts wrote.

The pound fell 0.5 percent to $1.5388 at 3:45 p.m. in London, extending its drop since Aug. 2 to 3.2 percent.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index. A resistance level is an area on a chart where analysts anticipate orders to sell a security, and a support level is an area where they anticipate buying.

To contact the reporters on this story: Stephen Morris in London smorris39@bloomberg.net.

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