Traders started the year bearish on the pound and then got bullish.
Given the tame reaction to a string of bad PMIs, they are not overly long, so while sterling has room to fall further it may not drop that much.
To meet the minimum requirement of a technical correction of January's rally, cable must reach 1.2909, but that includes the flash crash.
If that's ignored, a minimum tech correction of the Jan.
2-25 rally is 1.2976 and 1.2935 if using December's 1.2477 low as a base.
The potential for a downside correction is small.
It's prudent to look towards a range play that may hold for the next few weeks, such as 1.2700-3200 or 1.2800-1.3300, and then only look to trade against move if they approach either extreme.
With so much uncertainty surrounding Brexit, more choppy but ultimately directionless moves for the pound are most likely.
Dec-Jan GBPUSD rally retracements Click here