Short covering, broad based weakness in Dollar and risk affinity that has so far boosted GBP/USD, may lose its steam going ahead.

Today's release of weaker than expected trade balance and worst slump in China's exports have already dented global risk affinity to some extent and if European Central Bank (ECB) refrain from further easing it could spark sell offs in equities boosting global risk aversion.

Recent data from US suggests, inflation have finally started showing its face over the horizon and policymakers are becoming more confident over reflation. Dollar might shrug off its recent weakness going ahead.

Short covering also might hit a blockade, as Pound rose almost 450 pips from its recent low against Dollar.

Though the grand even is still a bit far away, EU referendum on June 23rd. We expect Pound to remain under pressure throughout the phase.

Trade idea -

It is advised to keep an eye out for opportunity to short Pound against Dollar and Yen. Small positions can be built starting from 1.425-1.43 area and at rallies.

Pound is currently trading at 1.425 against Dollar.