The apparent drop in Brexit pessimism expressed in diminishing short bets on sterling may in CFTC data may come back to haunt GBP/USD.
In the current reporting period, which ends at today's close, GBP/USD has fallen 0.73 percent.
That contrasts with with EUR/USD rising 0.57 percent and USD/JPY sliding 0.16 percent. GBP/USD's poor performance is directly related to ongoing Brexit uncertainty nL1N21R0S1.
Still, current IMM spec short positionong in GBP/USD hit its lowest since June 2018 nL1N21Q0F8 in the previous reporting period.
That move came as market participants became increasingly convinced that Britain would avoid crashing out of the EU with some sort of deal, despite uncertainty as to how that would be achieved -- and was accompanied by reduced volatility and lifted 25 delta RR pricing.
The reduction in GBP/USD short positioning may act as a canary in the coal mine, hinting at further weakness, as first specs and then investment managers shy away from GBP/USD positioning amid lingering Brexit uncertainty.
Whether the EU grants a long or short extension to the UK by April 12's Brexit deadline, investment in the UK is likely to remain muted as the long-running Brexit drama plays out.
Bulls need a rise above the trend channel top and 30-DMA by 1.3161 to gain momentum, while bears eye a push below the 200-DMA by 1.2976 and daily cloud base at 1.2880.