- GBP/USD is on the verge of a daily upside extension towards 1.3750.
- The 4-hour chart is where the current price action is being monitored for a break of critical resistance.
The price of the pound vs the US dollar is headed into a supply territory on the longer term charts and a healthy correction to the downside could be in order in coming days and weeks.
However, for the meantime, there is bullish market structure and price action on the lower time frames which are illustrated in the following top-down analysis.
Monthly chart
Bulls have been in charge of late in a continuation of the 2020 recovery.
However, there is a strong layer of resistance ahead in a supply zone where the next bearish correction would be expected to initiate a run to prior resistance now turned support.
Weekly chart
It is early days yet on the weekly chart, but should the market remain in a narrow range, a weekly doji could lead to an immediate downside correction to the 38.2% Fibonacci and the confluence with prior resistance looking left.
Daily chart
However, from a daily perspective, the W-formation's neckline has already prover resilient as a support and there has been a healthy correction into deep Fibos.
Therefore, an upside continuation on the daily time frame is expected.
4-hour chart
On the 4-hour chart, the price broke the first level of resistance which is now expected to act as support.
A break of the next layer of resistance, an old support and pin bar low, will open prospects of a high probability trade setup to the upside and towards 1.3750.
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