Pound gearing up for ‘impulsive’ move: Technician

The British pound has been on a downtrend against the U.S. dollar for the last two years, but with a sterling surge on Wednesday ahead of the Brexit vote, one technician is looking for the pound to make a comeback.

Rich Ross, technical analyst at Evercore ISI, believes that Britain will remain in the European Union and as a result, the pound will break its downtrend against the U.S. dollar. Looking at a long-term chart of the pound against the dollar, Ross points out that a bullish reversal is in the cards, especially since the pound had previously strengthened against the dollar mid-last year.

"We get this bullish reversal, or hammer, a few sessions ago in the currency, and that has set us up for this impulsive move off the low," he said Wednesday on CNBC's "Trading Nation." "So what I think we're staring at here is a very well-defined trading range." Ross is referring to a "bullish hammer" that he sees in the pound-to-dollar chart, where an individual candle at the point of reversal takes the form of a hammer.

That range, according to Ross, starts at 1.41 on the low end and hits 1.47 at the high end. But Ross believes a remain vote will take the pound through that range to sit above its 200-day moving average.

"On a breakout or a Bremain, I think it would project upside to 1.53, [which] would be quite bullish for risk assets like stocks, commodities, and of course it would correspond with dollar weakness," he said.

"[Once again], I think we get a Bremain, which would be bullish. It should benefit the pound and we get a break above this multiyear downtrend, we take out the 200-day moving average and we go higher from there," he added.

The pound did strengthen to hit a year-to-date high versus the dollar on Wednesday.


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Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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