We are heavily bearish of the GBP and have written several articles recently on it and the GBP has fallen back a little but we now expect it to fall back a lot...

In terms of the GBP -"While we believe that the pound can continue to pick up support, we see this as a less straightforward call now that the market is holding long GBP positions. This positioning implies that the pound may become more sensitive to disappointing news or to dovish takeaways from the BoE which indicates scope for more volatility," (Jane Foley Rabobank)

Volatility will be to the downside – the speculative GBP position is at a record and this points to a major decline – not everyone agrees though...

"The confluence of a few different factors – Labour’s landslide, the Bank of England’s caution of cutting rates, and political uncertainty elsewhere, among others – is driving positive sentiment on the pound. Although positioning looks stretched by historical standards and raises near-term risks of a downside correction, it doesn't necessarily mean the Pound's broader, multi-month uptrend is at risk. A growing number of investors are likely to pile in, further pushing the currency’s value in the near term. " (Nigel Green CEO of deVere Group.)

We see all the bullish fundamentals are priced in – a labour victory isn't GBP bullish in our view – the market thinks that public sector pay rises of 5% will stoke inflation but that wont happen as they will have to fund the money with tax hikes which will dampen spending.

Political uncertainty elsewhere is not bullish for the GBP it is not a safe haven currency like the USD, CHF, or JPY.

Bank of England caution which they refer to is priced in with the market seeing no cut in August

We expect a deep correction due to speculative positioning here is another view of the COT Net Traders from a longer-term perspective – It's a bullish extreme.

All the good news is price and speculators won't pile in long and push the GBP to new highs in our view - speculative longs will get hit on stop and trigger a major downside move...

Technical Analysis 

The first part of the move we were expecting has occurred and we now expect a break of key support to trigger higher volatility on the downside as speculators get hit on stop.