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  • GBP/USD at a cross road, with monthly supply territories problematic for the bulls. 
  • Bears will be keen to see a break of daily support, and there are two scenarios for how that might play out. 

GBP/USD is a tricky pair at the best of times, renowned for higher volatility in the forex space. 

The 4-hour ATR is now at the highest level since 23rd November as we move into the crucial make-or-break talks between EU/UK Brexit negotiators, and the clock is ticking. 

The price action has been in the hands of the bulls for the most part, with cable climbing from weekly lows in the 1.27 area and en-route towards a new swing high, but stalling short in monthly supply territory, so far.

The bulls have marked a recovery high of 1.3442 this week, but the price has stalled and is pressured, currently down 0.37% on the day.

So, with price at weekly resistance and below 1.3514 monthly highs, where next?

The following is a top-down analysis that illustrates where the next opportunities could arise, either to the upside, on a break of the monthly resistance, or to the downside on a break below daily support. 

Monthly chart

The price action on the monthly chart shows that the bullish impulse was rejected at old resistance. 

The price subsequently made a 61.8% Fibonacci retracement and then moved back to test the highs, supported in the 50% and 38.2% regions. 

A bullish scenario can only exist on a break of the monthly supply zone.

Weekly chart

The weekly chart shows that the late August wick triggered a monumental sell-off. 

Therefore, this is likely to be a strong area of resistance. 

There is not long to go until the close of this week, and a bearish close, (red candle, currently green), could be the makings of a downside shift. 

The following offers two scenarios for the downside:

Daily charts

The first scenario relies on the daily wick being filled on the lower time frames and a break of current support. 

The second scenario relies on support holding, for the time being, and the formation of a right-hand shoulder of what could be the makings of a bearish head and shoulders top. 

Both scenarios would equate to a downside opportunity from which swing traders can administer from a lower time frame, such as the 4-hour chart, for optimal positioning.

This would be according to market structure and price action.