Final answer:
Variable decelerations observed on the external monitor during a contraction are indicative of possible umbilical cord compression, which may lead to a decrease in the fetal heart rate.
Step-by-step explanation:
The nurse suspects umbilical cord compression if variable decelerations are noted on the external monitor tracing during a contraction. Variable decelerations can occur when the umbilical cord is being compressed, which may be due to various reasons such as cord entanglement, knotting, or when the cord is caught between the fetus and the mother's pelvis. This compression can transiently decrease blood flow through the cord, leading to a drop in the fetal heart rate during a contraction. Early decelerations correspond to head compression, whereas late decelerations are associated with uteroplacental insufficiency.