GBP/JPY Weekly Outlook

GBP/JPY dropped to as low as 128.77 but rebounded strongly since then. The development indicates that a short term bottom is in place. Initial bias will be mildly on the upside this week and stronger rise should be seen towards 55 days EMA (now at 134.11) But upside should be limited well below 137.75 resistance and bring another fall. Below 130.48 will flip intraday bias back to the downside. Further break of 128.77 will confirm fall resumption towards 126.73 low.

In the bigger picture, GBP/JPY is still trending well below the medium term falling trend line from 163.05 (now at 137.84) and thus fall from there is still in progress for a test on 118.18 low. Break there will confirm that whole down trend from 2007 high of 251.09 has resumed for 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. However, note that sustained trading above the trend line (now at 137.87) will argue that fall from 163.05 is finished and turn focus to 145.94 for confirmation. Also, this will suggest that such fall is merely the second wave of the whole consolidation pattern from 118.81 and will bring another rise to 163.05 and above before resuming the longer term down trend.

In the longer term picture, fall from 251.09 is treated as resumption of multi decade down trend. Note that the fall from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. Another long term decline is still expected after completion of the correction/consolidation from 118.81.

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