Sterling vs the US dollar: what happens now?

Our chartist analyses how the latest Covid-19 strain could affect the pound.

The pound and the dollar

With British tourists currently unwelcome internationally, the UK currency could be expected to behave oddly. It has certainly obliged.

With the sterling/US dollar pairing trading above the critical $1.35 level, some real hope is possible in the future for those folk planning on taking their kids to the hell which is Disney Florida.

Doubtless, ongoing travel bans contribute to the utter lack of folk emailing to ask about the dollar. The January eruption of holiday adverts on TV invariably promotes questions about buying the greenback now or holding off for a while.

We suspect that this year the relationship should continue to firm up. Strength anytime soon above 1.37 looks pretty capable of bringing 1.388 with secondary, if exceeded, a rather more attractive 1.440.

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Visually, the secondary is fairly interesting, taking the pair to the same level as 2018's high and suggesting the presence of a glass ceiling, along with inevitable hesitation in a rise.

What really surprises us for the longer term is a calculation (if any of this scenario plays out) which gives 1.734 as a viable big picture ambition sometime in the presumably distant future.

This would suggest the idea of a future return to the level which ruled from 2009 through to 2014, a pleasant concept, as it again promises a level where some turbulence can be expected.

If it all intends to go wrong, the pairing needs to reverse below 1.310. Maybe the rest of the world shall not prove keen on the UK’s new mutant Covid-19 strain proving our most successful export!

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.