GBPUSD – a retest of 1.2600 looks likely

The downside break of the 1.2800 to 1.2600 range the pair has held since 14 Dec has been well traded by clients. Looking at the current skew in open interest, traders see a higher risk of a move back to the breakout point, with 71% of open positions currently held long. I see the risk of modest short covering through late Asia but would take the timeframe in and see how the price reacts into the former range lows and 5-day EMA. A rejection and increased signs of a trend day would suggest reengaging with shorts for a move towards the 100-day MA at 1.2469. Staying on the GBP theme, GBPCHF is also on the radar with a tactical view of potential upside - given the set-up on the higher timeframes its aggressive to be long the cross at levels, but if that is the case, I would be placing tight stops below 1.0880, with a view to add to the position on a close through 1.0960.