Why things could get substantially worse for sterling

by Alistair Strang from Trends and Targets |

A continued slump for the pound is looking more likely as the charts flash red.  

GBP/USD. The pound/dollar shambles

Our previous report proved accurate and now we're a little gloomy.

After Brexit, the US is bound to find UK imports quite competitive. If only the UK still had a reasonable manufacturing industry!

The immediate problem that sterling now faces is an expectation of a "bottom" on the current cycle at $1.1677.

Unfortunately, there's a heck of an argument suggesting things could get worse, substantially worse, as the big picture indicates a real bottom should occur at $0.9922 eventually.

In addition, there's the issue of the red uptrend which ridiculously dates back to 1985.

We're perfectly aware some readers were not even born when this uptrend commenced 34 years ago but unfortunately the market appears not to care about the age of a faded red line.

The inset on the chart highlights what has happened in the last few days since the trend broke. Visually, there can be little doubt the market is perfectly aware of this line.

At time of writing, it is at $1.20807 (roughly) with the currency pairing requiring to close a session above this to indicate it has all been a dreadful mistake.

Visually, this appears unlikely, thanks to the market acknowledging this historical trend.

On the plus side, anyone opening a short and hoping for the best (or worst) can emplace a fairly tight stop at $1.2106, this being the highest achieved since the trend broke.

In theory, moves above this level allow for $1.2327 initially with secondary, if bettered, calculating at $1.2475.
When a major trend such as this breaks, we recommend not holding your breath while awaiting recovery!

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. 

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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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