How Low Can the Pound-Dollar Rate Go? Society of Technical Analysts Answers

"While below there, we can only assume more pain for the Pound" - Karen Jones, Society of Technical Analysts.

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As the energy crisis and the lack of government continue to take bites out of the British Pound, we are taking a look at the charts to see if they will give an idea of how far the Pound will fall.

First up is Sterling against the mighty US Dollar.

Sterling sinking against the US Dollar is not a recent event - this bear trend has been in place since 2007, but the pace of the down move is gaining momentum and has been doing so for much of the year.

The market peaked at 1.4250 in June 2021 and has now fallen nearly 19% from that high. 

The first obvious support is the 1.1410 2020 low followed by the support line from 1993 coming in around the 1.1100 mark.

Fibonacci extensions, from the 2007 peak and the 2014 peak, cluster at 1.1190/70.

The monthly RSI is low at 19, but it has been lower and currently is just confirming the trend. 

Above: Pound to Dollar rate shown at monthly intervals.

The 9-period daily RSI is low at 22, but it has been lower, and so far, is showing no signs of divergence.

On the topside the July low at 1.1760 offers initial resistance, but the 55-day ma at 1.2021, the cloud resistance spanning between approximately 1.2200 and recent high at 1.2293 offer a dense overhead resistance band.

While below there, we can only assume more pain for the Pound.

Above: Pound to Dollar rate shown at daily intervals.

Just as interesting is what is happening on the EUR/GBP chart, which has the .8721 June high in its sights. This is also the approximate location of the 55-month ma at .8715.

This moving average held the up move in June, and we would treat a close above here as likely to trigger another attempt on the resistance above 0.9200 that has managed to keep the Euro in check since 2016.

The Monthly chart also shows that the 200-month ma held the downside beautifully in March 2022.

Above: Euro to Pound rate shown at daily intervals.

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