The pound may weaken more than 2 percent to $1.5130 within three months if it declines below a level of so-called support, Societe Generale SA said, citing trading patterns.
Sterling slid 0.8 percent last week and if it falls below the $1.5360 level that represents the lows seen last month, any rebound will become less likely, technical strategists Hugues Naka and Fabien Manac’h wrote today in a note to clients.
There’s an increasing chance the pound will fall below the $1.5360 “support level” and weaken to $1.5270, close to the October 2011 low in the next one to two weeks, Paris-based Naka said today by telephone. The currency will “then test the tentative support line, which comes at $1.5130” in around three months, he said.
The pound gained 0.1 percent to $1.5446 at 1:16 p.m. in London. The currency dropped to $1.5362 on Dec. 29, the weakest since Oct. 6, according to data compiled by Bloomberg. Sterling last traded at $1.5130 in July 2010.
Support refers to an area where analysts anticipate orders to buy a currency and its related instruments. The stronger the support, the more selling is needed to drop below that level.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
