The market is heavily short of EUR/GBP in an environment where there aren’t many other big positional trades going on. I guess we can make an argument either way here; perhaps the market has plenty of scope to increase shorts as there are so few positions elsewhere, or the lack of general momentum will cause the shorts to run for cover soon.
I’m still of the view that we are headed to .75 but the ‘easy’ money has been made in the move from .85 to .80 and now that the move is more mature, we are likely to see more of a grind lower with plenty of profit taking rallies along the way.
I’ve heard quite a few reports in the last few weeks of heavy profit taking by big hedge funds in GBP/CAD, GBP/JPY as well as EUR/GBP.