Cable has largely been a trade that tracks the risk mood in the markets for the past two months. It bounced on Friday on what as presumably month-end position squaring.
That gain is more than half erased now with the pair breaking through the 61.8% retracement of the low-to-high move on Friday. That was a critical spot to hold for the bulls and now there isn't much protecting the pair from a return to 1.2420.
Adding to the selling pressure is the risk aversion in equities, worry about European/UK growth and the unceasing march higher in US Treasury yields.
There's a chance the BOE will shift to a more-neutral stance this week and that could really cut he legs out of the pound.
