The GBPUSD has been a strong bullish market this month, producing a very strong move higher without offering much in terms of correction.
Price actually managed to break above a weekly resistance level and stalled above the level. At the same time, price had broken away from the mean value and over extended itself. The price stalling at extreme prices, and the disconnect from the mean is a red hot sign the market is about to correct.
A bearish outside day “sell signal” formed at the start of this week, which was the catalyst for the mean reversion move. The lows were broken and the sell off started.
This kind of mean extension / mean reversion price action behavior occurs all the time – if you’re not clued into it then you’re missing out on some really lucrative price moves, and it’s really basic straight forward stuff.
Now the sell off has begun, it’s mostly likely we will see the selling the selling intensify and continue toward the mean.
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