GBP/JPY dropped to as low as 138.50 last week as the decline from 148.87 extended. Downside momentum diminished mildly but there is no clear sign of bottoming yet. Further decline is expected initial this week to 61.8% retracement of 131.51 to 148.87 at 138.14. Sustained break there will pave the way to retest 131.51 low. On the upside, break of 141.73 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.
In the bigger picture, current development suggests that GBP/JPY was rejected by 149.98 key resistance. And medium term fall from 156.59 is still in progress. Break of 131.51 will target 122.36 (2016 low). On the other hand, decisive break of 149.98 should confirm that medium term fall from 156.59 (2018 high) has completed at 131.51 already. Further rally would be seen back to 156.59 resistance and above.
In the longer term picture, the rise from 122.36 (2016 low) to 156.59 (2018 high) doesn’t display a clear impulsive structure. Thus, we’re treating price actions from 122.36 as a corrective pattern. In case of an extension, strong resistance is likely to be seen at 50% retracement of 195.86 (2015 high) to 122.36 at 159.11 to limit upside. On the downside, break of 131.51 support will bring 122.26 low back into focus.
