Speculative short positioning is NOT overextended, as was the case a few months ago. There is room for large speculators to build net short GBP positions.
Market sentiment was very GBP positive until recently. Market has been caught off-guard. More room for Sterling downside.
Technicals
Broken key support levels as in chart. Next target 1.26
US dollar
Dollar strength may resume from oversold territories heading into NFP. In any case, risk for further USD downside is diminished in the near term.