Pound Set for 1.4% Drop on Trendline Breach: Technical Analysis

The pound may fall 1.4 percent versus the dollar after it traded below a so-called support level, Commerzbank AG said, citing trading patterns.

The U.K. currency breached $1.6027, the six-month trendline drawn from the Nov. 15 low at $1.5830, leaving it exposed to further selling, Karen Jones, the London-based head of foreign-exchange, fixed-income and commodities technical analysis, said in a telephone interview, citing third-party data.

“This has left the $1.5951 seven-month uptrend exposed and failure here will target the November low,” Jones wrote today in a report e-mailed to clients. She added “$1.5863/38 is also the location of the 55- and 200-week moving averages and failure here will be regarded as key.”

The pound appreciated 0.2 percent to $1.6053 at noon London time after falling as much as 0.1 percent to $1.6005.

The British currency would face greater selling pressure if it closed below the six-month trendline, she said.

Jones recommended selling the pound at $1.6068 and would close the position at a profit if it fell to $1.5850.

Support refers to an area on a yield graph where analysts expect sell orders may be grouped.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

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