The pound's rally to a four-month high against the dollar isproving too much for currency traders unsure whether Mark Carneywill step up stimulus efforts when he takes over as Bank of England(BOE) governor next month.

Sterling's failure to extend its advance after rising above its200-day moving average on June 13 may be a signal its winningstreak is ending, according to Barclays Plc. The pound is alsoapproaching a key Fibonacci retracement level where sell orderstend to be clustered, while the stochastic oscillator crossed athreshold that implies an imminent reversal.

“We're at a point where sterling is a bit stretched,” KenDickson, an Edinburgh-based director for foreign exchange atStandard Life Investments Ltd., which oversees about $281 billion,said in a phone interview on June 17. “It could be pretty difficultto get beyond here in the near term.”

Dickson predicted the currency may fall to about $1.53 in twoweeks, from $1.5651 at 10:02 a.m. in New York, after rising from$1.5009 on May 29.

The pound rallied about 5 percent from an almost three-year lowof $1.4832 in March as Britain's economy avoided an unprecedentedtriple-dip recession and inflation accelerated. While that suggeststhe Bank of England may pull back from stimulus measures that woulddebase the currency, Carney has said central banks can do more toaid growth, prompting analysts to forecast more weakness for thepound.

Historic Gains

On June 13, Britain's currency climbed above the 200-day movingaverage for the first time this year. When the pound surpassed thatlevel in August and April 2012, it went on to gain as much as 3.9percent during the following month, data compiled by Bloombergshow.

That the currency hasn't appreciated this time means its advancemay be exhausted, Barclays technical analysts including JordanKotick in New York wrote in a June 17 note.

“Lack of upside traction through the 200-day average near$1.5698 is helping to keep us bearish for sterling versus thedollar,” according to the analysts. A move below $1.5615 “wouldencourage our bearish view toward initial targets in the $1.5490area,” they wrote.

The stochastic indicator for the pound versus the dollar was at88 on June 17, before falling back to 57 yesterday, indicating aselloff. The signal measures the current price relative to thehighest high and lowest low during a certain period to determine ifa currency is overbought or oversold. When the gauge rises above80, an oversold condition, and crosses below its moving average,traders consider it a bearish indicator.

Relative Strength

The pound rose as high as $1.5752 on June 17, 0.2 percent fromthe $1.5789 resistance level that represents its 61.8 percentretracement of this year's high and low based on a Fibonacci chart,data compiled by Bloomberg show.

Fibonacci retracement is named after a 12th century Italianmathematician and based on the theory that prices rise or fall bypredictable amounts after reaching a high or low. In this and otherforms of technical analysis, investors study charts of tradingpatterns and prices to predict changes in a currency, security, orindex.

“The evidence technically is that the pound is going to struggleto push through,” Richard Adcock, a technical strategist at UBS AGin London, said in a June 17 phone interview. “There will becorrection to the downside again to unwind the upside extreme.”

The pound's 14-day relative strength index versus the dollarclimbed to 69.6 on June 13 and was at 62.9 today, compared with the70 level that indicates a currency has risen too far, too fast.When sterling breached the threshold in September, it startedfalling within a week, and during the following two months hadtumbled 2.7 percent, data compiled by Bloomberg show.

Carney, who takes the helm of the BOE on July 1, said earlierthis year that central banks aren't “maxed out,” fuelingspeculation he'll favor measures such as bond purchases. Theminutes of the bank's June 5-6 meeting published today showed thatoutgoing Governor Mervyn King lost his final policy vote, withofficials blocking his bid for more stimulus.

The pound will weaken about 4.6 percent to $1.49 by the end ofthis year, according to the median estimate of analysts in aBloomberg News survey.

Consumer prices in Europe's third-biggest economy rose 2.7percent last month from a year earlier, compared with a 2.4 percentincrease in April, the Office for National Statistics in Londonsaid yesterday. Gross domestic grew 0.3 percent in the firstquarter of this year, an official report confirmed May 23. Thathelped the pound climb versus 11 of the 16 most-traded currenciestracked by Bloomberg over the past month.

While growth has returned to Britain, its projected 0.9 percentexpansion this year will be 1 percentage point slower than theU.S.'s, according to Bloomberg surveys of economists.

“There are question marks about how far this strength willcontinue,” Karen Jones, a London-based technical strategist atCommerzbank AG, said in a June 17 phone interview. “My corescenario is that we'll see failure between here and $1.58. Thelonger-term trend remains bearish.”

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.