While we still retain a bearish bias on the Pound, we do not rule out the possibility of a short squeeze, which in turn could offer better levels for fading, as upside will likely remain capped in light of the uncertainties over trade with the EU, alongside the US, who are currently mulling tariffs on UK goods.
Momentum signals remain broadly weak for the Pound, while the muted price action in recent sessions hints at GBP/USD coiling for a breakout. As it stands, the Pound is anchored around the 50DMA situated at 1.2415. A firm break below 1.2400 raises the risk of a test of the mid-June lows at 1.2330-40. On the upside, gains may be capped at 1.2480-1.2500, which roughly coincides with the 100DMA.