GBP/JPY dropped to as low as 143.18 last week but formed a short term bottom there and recovered. Initial bias remains neutral this week for consolidation. In case of further rebound, upside should be limited by 147.04 support turned resistance to bring reversal. On the downside, below 144.52 minor support will bring retest of 143.18 first. Break will resume the decline from 153.84.
In the bigger picture, for now, we’re treating price actions from 156.59 as a corrective move. Therefore, while deeper fall is expected, strong support should be seen above 139.29 cluster support (50% retracement of 122.36 to 156.59 at 139.47) to contain downside and bring rebound. There is still prospect of extending the rise from 122.36. However, considering that GBP/JPY failed to sustain above 55 month EMA (now at 153.94), firm break of 139.29 will confirm trend reversal and turn outlook bearish.
In the longer term picture, the failure to sustain above 55 month EMA (now at 153.94) is mixing up the outlook. Nonetheless, as long as 139.29 holds, rise from 122.26 is in favor to extend to 50% retracement of 195.86 (2015high) to 122.36 (2016 low) at 159.11, and possibly further to 61.8% retracement at 167.78 before completion. However, firm break of 139.29 will turn focus back to 116.83/122.36 support zone instead.
