Today's Wall Street Journal includes a very interesting piece on the recent fall of the British Pound (GBP) against the US Dollar (USD). Indeed, as the article states, the GBP has hit a 4 month low against the USD and there are no signs of it stopping soon; the WSJ feels that this is a decline that could continue for the next few years. The article went on to talk about the different fundamental factors that have caused the fall, including things like the carry trade and other economic strategies.
What the article failed to mention, however, is that the fall of the GBP has been further exacerbated by the technical factors of trading. As you may already know, there are people that focus on the fundamental factors while others focus on the technicals (mostly price charts and price action). The key part that the article didn't mention is that 3 weeks ago, the GBPUSD hit a technical level that indicated that the price of the GBPUSD was due for a fall. This could be seen by strictly looking at charts and ignoring all other factors. These levels serve somewhat as both support & resistance and the current price level has definitely been a point of resistance for the GBPUSD.
In effect, we have reached a time when both the fundamental and technical traders have become bearish on the GBPUSD. Recall that within 2009, the GBPUSD has traded as low as the 1.4400 range which is a far cry from the current level. While I am not convinced that this will contnue for the rest of the year, it is unlikely that the current levels in the 1.5890 range are sustainable.
