Interactive Investor

Outlook for the pound vs the dollar in 2021

15th July 2021 07:46

Alistair Strang from Trends and Targets

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After a grim decade or more, this chartist analyses whether a recovering sterling could make multi-year highs versus the dollar.

Forex GBP:USD with a 1.549 target!

As shown on the chart below, since 2007 the British pound has enjoyed a pretty grim downhill ride, and it was only at the end of 2020 when the relationship finally broke through the Blue downtrend. Our previous analysis gave an initial breakout ambition at $1.4061, a number which has been achieved and exceeded a couple of times this year.

We are inclined to believe, should the market next exceed $1.4061, a new cycle can be anticipated with future recovery to an initial $1.4760 with secondary, if bettered, a rather less certain (at present) $1.5490.

Our alternate scenario isn’t initially scary. After all, prices go up and down with great volatility. There’s an immediate non-threatening danger of weakness below $1.3730 leading to reversal to an initial $1.3417. This visually matches the price level at which the pairing exited the long term downtrend and exhibits a point at which we’d hope for a rebound.

The danger comes, if $1.3417 breaks as this calculates with ongoing reversal toward $1.3131. While the price level may not sound so dreadful, by breaking below the historical level of trend break, the pairing is at risk of entering a period we’ll call stodgy. 

Across the wider marketplace, when shares or commodities start trading below such major levels of a trend break, price movements start to become pretty boring and the market feels very depressed, neither going up nor down with any real conviction. Perhaps this phenomena relates to the pandemic, as we’re seeing the effect around the world and it’s never confined to any particular sector or product.

In a brief summary, we now regard GBP:USD as heading to $1.4760, the pair needing below $1.3417 to cancel the prospect. Who knows, for the brave this may present a superb long position opportunity with an incredibly tight stop loss possible.

Source: Trends and Targets. Past performance is not a guide to future performance

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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