GBP/USD: New hourly bearish cycle, 100% target reached

The market looks poised for further downside judging by the latest selling flows, which have formed a sharp vertical move down. The next areas of critical support come at 1.2847 ahead of 1.2887, where I am expecting sellers to perceive value to extend the decline in line with the newly found down cycle.

Note, yesterday’s fall landed as one may have expected, at the 100% target projection at 1.2737, hence why we might be in for a very short-term corrective move up towards the mentioned areas.

There is significant disarray around the UK’s Brexit plans as the UK PM faces a revolt by some members of her Cabinet and a ‘no confidence’ vote has been called in the next few days.

If we see a confirmation of a resolution sub 1.2730 on the weekly, the next target mid-term is found around the 1.22 level. In terms of correlations, by assessing the 3-day correlations on a 30-period, it exists all the justification in the world to argue for lower levels based on valuation. Both the UK vs US 5-year yield spread and the EUR/USD indicate more downside.