GBP/JPY edged lower to 138.65 last week but rebounded since then. The break of near term falling channel suggests reversal but it’s limited by 142.75 resistance so far. Initial bias remains neutral this week with focus on 142.75. Break will indicate that fall from 148.09 has completed and turn bias back to the upside for this resistance. On the downside, break of 138.65 will resume the decline from 148.09. But in that case, we’d look for bottoming signal around 135.58, which is close to 135.39 fibonacci level, to bring rebound.
In the bigger picture, while the fall from 148.09 is deeper than expected, we’re not bearish in the cross yet. Price action from 148.42 is possibly developing into a sideway pattern with fall from 148.09 as the third leg. Deeper decline could be seen but we’re looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Rise from 122.36 is still mildly in favor to resume at a later stage. However, sustained break of 135.58/39 will confirm reversal and target a retest on 122.36 low.
In the longer term picture, based on the impulsive structure of the decline from 195.86 to 122.36, such fall should not be completed yet. But we will now pay close attention to the structure of the rise from 122.36 to determine whether it’s a corrective move, or an impulsive move. That would decide whether a break of 116.83 low would be seen.
