The British pound plummeted against its major trading partners after Bank of England Governor Carney signaled a rate cut would occur over the summer. He stated the Bank plans to make initial assessment at July 14 meeting and discuss further range of instrument options at Aug meeting. No comments were made on the GBP currency. Following Carney’s comments from London, GBP/USD dropped towards the psychological 1.3200 handle but has since rebounded back towards the 1.3340 area.
Price action on the GBP/USD 60-minute chart shows that despite the Carney selloff price is still slowly making higher lows. If we continue to see that trend, price may not find major resistance until the 1.3700 region. It is around that area that price could form a bearish Gartley pattern. Point D is targeted with the 70.7% Fibonacci retracement of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move. If valid, we could see a major reversal target the 1.3400 region.
If price is unable to continue its overall rebound following the Brexit outcome, we could see sterling target the 1.3250 area. If bearish momentum accelerates, Major support will come from the psychological 1.3100 handle.
The trade: Sell GBP/USD at 1.3725 with a stop loss at 1.3825 and a take profit at 1.3425. The Risk/Reward Ratio is 1:3