The pound may extend its decline against the yen as the British currency is set for the biggest monthly slide in 21 months, according to Gaitame.com Research Institute Ltd., citing trading patterns.
Sterling has lost 3.9 percent in May, poised for the largest monthly loss since August 2010, and traded at 124.56 yen as of 12:43 p.m. in Tokyo. Its 200-day moving average stood at 124.20, providing the currency with support, said Takuya Kawabata, a researcher at Tokyo-based Gaitame.com.
“The pound-yen is holding up around its 200-day moving average, and a drop below that level is likely to take the currency lower,” he said.
The next support for the pound is 123.48, the 61.8 percent retracement of the Jan. 13 low from the March 21 high, Kawabata said, citing a Fibonacci chart. If Sterling breaks that level, it may fall toward 122.77, matching a high in December, he said.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.