Bears are looking to achieve a mean reversion of 50% or possibly 61.8% in the GBP/USD currency pair, currently trading at 1.28469.
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- GBP/USD bears eye a 50% mean reversion if not the 61.8%ratio.
GBP/USD ended at around 1.2840 on Friday after reaching its lowest level since July 6 while investors remain concerned that the hawks will continue to circle over the Federal Reserve following the release of stronger-than-expected second-quarter Gross Domestic Product data from the US.
Meanwhile, in the UK, weaker-than-expected PMI data and lesser inflation are pointing towards a less hawkish outcome at the Bank of England next week. Markets still anticipate a 25 bps hike at the central bank’s August meeting but money markets see a peak of 5.75% in November, lower than prior projections. This leaves a bearish focus on the charts for GBP/USD and bears are already moving in at the end of the week:
We could be somewhat premature in the sell-off but that is not to say that we do not have any downside in play for the initial balance next week:
The W-formation is compelling and could be a pull on the price towards last week’s lows that meets a 50% mean reversion if not the 61.8%ratio. The neckline support has a confluence with the 78.6% Fibonacci.
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