- GBP/USD bulls holding up the bears at critical weekly support.
- A test of the daily M-formation could be in order before 1.34 area and monthly swing targets.
GBP/USD will be a focus this week considering the Bank of England as well as the Federal Reserve critical interest meetings.
The following is a top-down analysis that arrives at a longer-term bearish bias toward the 1.34 area, albeit with near-term bullish prospects on the daily chart for the sessions ahead.
GBP/USD monthly chart
The monthly chart shows that there are prospects of a head-and-shoulders pattern emerging, which is a bearish scenario for the longer term and reveals the 1.34 area as a target.
GBP/USD weekly chart
From a weekly perspective, the market is bounded by support and resistance following a fakeout of the old dynamic trend line resistance. A break of support near 1.3720 is required if the price is going to head lower.
Looking at the latest positioning data, there are synergies for a near term move up in GBP before the next move that is lower.
GBP/USD daily chart
The M-formation is a bullish reversion pattern where the price would be expected to move to test at least the wicks of the neckline that are near 1.3790. At that point, cable will be meeting old support turned new resistance. Therefore, a downward impulse could drive in enough supply to break new lows on the path toward the monthly 1.34 area targets in the coming weeks.
GBP/USD analysis recap & levels
In a recap, this analysis is looking for a retest of daily old support neat 1.3790 for the opening sessions. Then bearish pressures would be expected to break the support of the 1.3720s, revealing weekly support in the 1.3590s. Consolidation is building a bearish market structure that should take some time to play out in the lead-up to a run toward the 1.34 area and longer-term monthly support zone.
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