Rolls Royce Share Price: Saved By A Weak Pound?

The Rolls Royce share price has been under intense pressure for the past few weeks. The RR stock has plunged by nearly 45% since the start of the new year. At the time of writing, it was trading 1.12% lower at 71.80p. Rolls Royce Holding Plc has a total market capitalization of 5.99 billion pounds.

RR Crisis

Rolls Royce Holdings is a British multinational aerospace and defense company. The company is mostly known for its cars. However, it makes most of its money from selling airplane engines such as the popular Trent 1000 engine used in Boeing 787.

RR was among the biggest corporate losers from the coronavirus pandemic. Despite the pandemic being almost entirely in the rear-view mirror, the Rolls-Royce share price continues to tumble. The aircraft engine-manufacturing company recently approved the sale of its ITP Aero business, this is expected to bring in about 2 billion pounds of capital. However, RR stated that this will be used to pay off its huge debts. Rolls Royce added nearly 8 billion pounds in debt obligations as it fought for survival during the pandemic.

However, investors remain somehow positive as UK’s Prime Minister, Lizz Truss introduced tax cuts. As a key industrial company in the UK, these tax cuts will have a positive impact on Rolls Royce Holdings’ profitability.

The weak British pound is also a potential catalyst for the company. Rolls Royce Holdings usually conducts its business in US dollars. The company’s most important segment, the servicing business, is made using US dollars.

Rolls Royce Share Price Analysis

The daily chart shows that the Rolls Royce share price has been on a strong bear run for the past few months. The RR stock has formed a descending triangle pattern, validating its bearish run. It is moving below the 25-day and 50-day exponential moving averages.

Therefore, as UK’s recession concerns continue, the stock is likely to continue dropping. If this happens, the next key support level will be at 65p. however, a move above the resistance level at 78.75p will invalidate this view.

RR Price Chart

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