The pound, which had rallied on Friday to the relief of some, has now dropped 3.5% this morning so far to a low of 1.3912! The UK bank bailout which was announced yesterday, along with the seeming de facto RBS nationalization and multibillion pound loss for 2008 (something like 28 BILLION pounds!!) had a lot do to with it - RBS shares dropped 67% yesterday. Where do we go from here? These are levels traders didn’t predict, but the government bailout has put a renewed focus on public finances and the ability to repay debt. The break of 1.4350 had provided key resistance in the past, and once this was violated the pair breezily moved through support at 1.4060 and then the psychologically significant 1.40 level. 1.3950 was the September 2000 low. From here, the next level to watch for is the June 2001 low of 1.3680 and then it’s an open space down to 1.2500.
In other news, EURUSD broke through 1.30 psychological support (though not as violently as the sterling) for a low of 1.2918. USDCAD slightly higher again to 1.2650 right now - an attractive level to sell USD.
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