GBPUSD has been a challenging pair to read lately.
It’s been a game of tug-of-war since the market started going sideways in early April.
However, there’s a potential formation on the daily time frame that I’m keeping a close eye on for later this month.
But the key word there is “potential”.
The pound has yet to make up its mind, and the US Dollar Index (DXY) is sitting on a pivotal level today at 103.50.
If dollar bulls can defend 103.50 and push it higher toward 105.60 later this month, the GBPUSD will start looking top-heavy.
More specifically, the GBPUSD price action since early April will look like a head and shoulders reversal pattern.
As mentioned above, this is just one potential outcome and is speculative as of now.
If this latest rally becomes the right shoulder, the next critical step in confirming a top will be a daily close below the 1.2300 neckline.
That would open up the measured objective at 1.1930.
Of course, there’s an alternative scenario where the DXY breaks below 103.50 for a deeper correction, and pairs like GBPUSD continue higher.
If that’s the case, I’ll reevaluate things.
For now, all eyes are on DXY 103.50 support and GBPUSD 1.2530 resistance.
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