GBP/JPY edged lower to 137.51 last week but recovered. The development argues that choppy fall from 142.79 is completed already. Further rise is in favor in near term. Meanwhile, there is no change in the overall view that price actions from 148.42 are forming a consolidation pattern.
Initial bias in GBP/JPY is mildly on the upside this week. Break of 140.60 resistance should confirm near term reversal and target 142.79 resistance first. Break there will send the cross through 144.77 resistance to 148.42 high. On the downside, below 137.51 minor support will extend the fall from 142.79 towards 136.44 support. But still, we’d expect support from 50% retracement of 122.36 to 148.42 at 135.39 to contain downside and bring rebound.
In the bigger picture, price actions from 122.36 medium term bottom are still seen as a corrective pattern. Main focus is on 38.2% retracement of 195.86 to 122.36 at 150.42. Rejection from there will turn the cross into medium term sideway pattern. Or, sustained break of 50% retracement of 122.36 to 148.42 at 135.39 will turn outlook bearish for a test on 122.36 low. Though, sustained break of 150.42 will extend the rebound towards 61.8% retracement of 195.86 to 122.36 at 167.78.
In the longer term picture, while price actions from 122.36 would develop into a medium term correction, fall from 195.86 is still seen as resuming the down trend from 251.09 (2007 high). Hence, after the correction from 122.36 completes we’d expect another fall through 116.83 low.
