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The market is neutrally positioned on the Pound following weeks of selling pressure, meaning the risk of a further sizeable decline driven by repositioning is greatly reduced.

According to BNP Paribas long positions held on the Pound have now fully unwound from a score of +8 just last week.

"Our proxies for CTAs and options investors reduce longs and our proxy for real money investors extends shorts," says BNP Paribas.

BNP's custom positioning model captures a wide range of speculative investor types, ranging from real money investors to electronic trading venues, option investors and retail investors among others.

The model includes data from CFTC futures, DTCC, risk reversals, on-off NDF spreads, buy/sell pressures, client surveys and the CTA tracker. It could therefore offer a more extensive and sophisticated insight into positioning than the much-watched and popular weekly CFTC report.

Positioning on a currency is an important signal of the potential for future moves: Long positioning on the Pound - i.e. bets that it would go higher - had reached multi-year highs when the Pound-Dollar rate hit 1.31 in July.

But such an extended positioning suggested increasingly limited scope for upside as building further longs was prone to slow while increasing downside risks in the event the positions are unwound.

An unwinding of long positions since July has duly taken place and provided the momentum that has helped the Pound-Dollar rate retreat back to 1.21 at the time of writing.

Now that positioning is neutral a looming threat of further position unwinds fades and with it downside pressure on the Pound.

The Pound can still fall of course, but the unwinding of long positions is no longer a factor that can meaningfully contribute to this.

Elsewhere, BNP Paribas notes USD longs continue to extend to +27 from +20 last week, with all components now holding USD longs. Overall sentiment worsens in most other regions, especially in other G10 currencies.

Overall positioning on the Euro has turned increasingly negative going from -6 last week to -12 today.