GBP/USD bulls correcting the price towards 1.2050 into the FOMC minutes

• GBP/USD bulls are stepping in ahead of the FOMC minutes.
• This leaves a 38.2% ratio and the 50% mean reversion level vulnerable for the immediate future. 
• On the 4-hour chart, the key structure on the upside is around 1.2150, 1.2280 and to the downside, around 1.2020 and then 1.1965.

GBP/USD is under pressure in midday New York trade. Cable was last down 0.39% on the day at 1.2046 and has fallen from a high of 1.2142 and met a low of 1.2027 from where it is correcting currently. 

Markets have been digesting plenty of data this week in the build-up to the Federal Reserve's minutes from its July meeting. The Us dollar had been under demand following data that showed US consumer spending was steady in July. US Retail Sales were unchanged due to declining gasoline prices that weighed on receipts at service stations but, overall, consumer spending appeared to hold up. This was seen to assuage fears that the US economy was already in recession.

However, the Fed is expected to continue to hike rates aggressively to battle inflation although softer-than-expected inflation in July had eased some concerns. On the other hand, looser financial conditions as benchmark 10-year Treasury yields hold below 3% has also increased the probability that the Fed may need to be more aggressive in hiking rates to make an impact. In any case, the release of the minutes from the Fed's July 26-27 policy meeting may shed light on just how aggressive they expect to be. Fed funds futures traders are currently pricing in a 48% chance of a 50 basis points increase and a 52% probability of a 75 basis points hike. 

As for domestic inflation, the UK's July Consumer Price Index data came in hot.  The headline came in at 10.1% YoY vs. 9.8% expected and 9.4% in June, core came in at 6.2% YoY vs. 5.9% expected and 5.8% in June, and CPIH came in at 8.8% YoY vs. 8.6% expected and 8.2% in June.  

Analysts at Brown Brothers Harriman explained that, of note, ''the Bank of England sees headline inflation peaking near 13% in October.  Market expectations have risen sharply on the realization that the bank is set to continue tightening as inflation spirals ever higher.''

''WIRP suggests a 50 bp hike on September 15 is fully priced in, with 25% odds now seen of a larger 75 bp move.  The swaps market is now pricing in 200 bp of tightening over the next 12 months which would see the policy rate peak near 3.75% vs. 3.25-3.50% at the start of this week and 3.0-3.25% at the start of last week.''

GBP/USD technical analysis

The hourly chart, above, shows that the price could be on the verge of a downside extension. However, it is in a corrective phase currently. The 15-minute charts identify areas of price imbalance, as per the greyed-out areas below:

This leaves a 38.2% ratio and the 50% mean reversion level vulnerable for the immediate future. 

On the 4-hour chart, the key structure on the upside is around 1.2150, 1.2280 and to the downside, around 1.2020 and then 1.1965: