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Charts Predict: Pound Could Reach Parity with Dollar

CNBC
Monday, 26 Jan 2009 | 4:48 AM ET

Sterling has taken a beating against many currencies recently, most notably versus the dollar, where it fell to a 23-year low of $1.35 last week.

The UK currency is likely to fall to $1.20 to $1.25, Robin Griffiths, technical analyst at Cazenove Capital said, but he warned that it could reach parity against the greenback.

"It's going to put a lot of strain on the UK economy full stop if we go down to $1 again," Mark O'Sullivan, director of dealing at Currencies Direct.

The S&P 500 index has also been volatile of late, falling sharply on Inauguration Day and then rallying on earnings news.

Griffiths told CNBC he was hopeful that the index will continue its 'Obama rally.'

"At the moment it is above the line in the sand (813), and so there is still some hope of a further Obama rally," he said Monday. "Having said that, we have retraced more than two thirds of the rally from the November low and that isn't good."

No matter whether the index continues its Obama rally or not, the index will go lower and break the November low later in the year, according to Griffiths.

In the commodities space, precious metals do look like the best place to invest, especially gold, he said.

Griffiths said he likes Newmont Mining .

"Newmont Mining is the largest gold mining company, and it is already showing relative strength," Griffiths told CNBC. "It's quite clear in these uncertain times, people are looking for gold-related investments to preserve their capital, if not to actually make a whole lot more."

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