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Pound May Drop 2.4% on Support Breach: Technical Analysis

The pound may drop 2.4 percent against the dollar after breaking through a key level of so-called support, Credit Suisse Group AG said, citing technical indicators.

The British currency is headed toward $1.4856, the 61.8 percent Fibonacci retracement of the currency’s advance between January and August 2009, after breaching $1.5274, the 50 percent retracement of that move, Cilline Bain, a London-based technical analyst at Credit Suisse, wrote today in a client note.

“We will continue to slide lower,” he said, confirming the report. “The next significant target is $1.4856.”

The currency tested the $1.5274 support level three times in 2011 and 2012, before rallying again, Bain said.

The pound fell 0.1 percent to $1.5224 at 10:17 a.m. London time after sliding to $1.5132, the lowest since July 21, 2010.

Support refers to an area on a chart where buy orders may be clustered. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

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

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