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British Pound A Major Disaster Just Waiting to Happen? 

Currencies / British Pound Oct 13, 2009 - 08:53 AM GMT

By: Garry_Abeshouse

Currencies Best Financial Markets Analysis ArticleIit may be an important key to events that will be played out over the coming weeks and months. Firstly, the long term chart (courtesy of www.sharelynx.com) shows the price going back to 1971. Important to notice here is the 1982 – 1985 fall from 2.4 to near parity, just above 1.0.  


Since then Sterling has always found support at 1.4, the most recent one being at the end of 2008 when the price bounced off the long term downtrend. The support at 1.4 and historical resistance at 1.7 can be seen more clearly on the Stockcharts.com Monthly chart below, while the weekly chart shows the close direct correlation between the equity market and the currency – unlike the USD, which shows a reverse correlation.

This shows clearly that any significant move down in equities could quite feasibly see Sterling test the March 2009 lows. A break below 1.4 would be historically highly significant as it would relate this fall directly to the currency crisis of the 1980’s. It is interesting to speculate whether this potential move down in Sterling will be a cause or effect move – either way the results will be the same – and that is a rise in the USD. Given the current poor fundamentals surrounding Sterling, how far Sterling falls over the coming weeks and months will also directly relate to how far the USD rises over this time.





Till next time.

Garry Abeshouse
Technical Analyst.
Sydney
Australia

garrya@bigpond.net.au

I have been practicing Technical Analysis since 1969, learning the hard way during the Australian Mining Boom. I was Head Chartist with Bain & Co, (now Deutsch Bank)in the mid 1970's and am now working freelance. I am currently writing a series of articles for the international "Your Trading Edge" magazine entitled "Market Cycles and Technical Analysis".

I have always specialised in medium to long term market strategies and after discovering the excellent Point & Figure Charts from Stockcharts.com in mid 2008, have concentrated on this style of charting ever since.


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