GBP futures: rally running out of steam?

Traders have scaled back their opening positions by more than 2.6K contracts on Friday to 191,605 contracts, according to preliminary figures from CME Group. The move represents the third day of contracting volume, in tandem with rising prices.

Short covering persists

The current scenario signals that GBP/USD's recent upside has been fuelled largely by short covering instead of fundamental demand, opening the door for a resumption of a leg lower once short covering ends. It is worth mentioning that Cable rebounded from sub-1.2600 levels on Wednesday to the current mid-1.2700s.