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.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more