Thursday 20th March 2014
Things have settled down in the currency markets after the economic data released yesterday. Pound/Euro is at €1.20, and I don’t expect it to go higher in the short term. Pound/Dollar has dropped to $1.65.
Today I’ll take stock of where exchange rates stand, explain something called ‘Support and Resistance’ which is limiting the rate going higher, and look at how to ensure you get the best possible exchange rate.
Sterling/Euro rates hit a resistance barrier at €1.20
As outlined in my post yesterday, the warnings from the Bank of England about the strength of the Pound have been limiting any gains. It has crept up a little more today, hitting €1.20 before dropping back slightly. This is what I thought would happen earlier in the week.
So why is it hitting the barrier at €1.20? It’s to do with something called resistance. For those interested in the technical side of it, you can find a detailed explanation of Support and Resistance here.
The chart above shows today’s movements, and you can see the rate hitting €1.20 before dropping back away.
In simple terms, a resistance level, in this case €1.20, is a key level at which the rate hits a barrier and drops back away. It happens because at certain levels the number of sellers exceeds the number of buyers causing the price to go back down.