GBP/JPY – 150.25
The British pound rallied and finally broke above previous chart resistance at 148.45, confirming our bullish view that the erratic rise from 120.50 low (wave v trough) has resumed and may extend further subsequent gain to 153.50-60, then 154.00-10, however, loss of near term upward momentum should prevent sharp move beyond 155.00, risk from there has increased for a correction to take place later.
Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.
On the downside, whilst initial pullback to 149.50, then 148.90-00 cannot be ruled out, reckon 148.10-20 would limit downside and bring another rise later. Below minor support at 147.25 would defer and suggest a temporary top is possibly formed, bring retracement of recent rise to 146.50-60, then towards 146.00 but still reckon support at 145.25 would remain intact, sterling shall head north again from there in Q4.
Recommendation: Buy at 148.20 for 151.20 with stop below 147.20.
The long-term downtrend from 570.99 (29 Feb 1980) is labeled as an impulsive wave with III with circle ended at 129.77 (20 Apr 1995) and the corrective rebound to 251.12 (20 Jul 2007) is treated as wave IV with circle and the wave V with circle selloff from 251.12 has possibly ended at 116.80 (almost reached our indicated target at 116.00) and major correction has commenced from there and indicated upside target at 183.90-00 (50% Fibonacci retracement of 251.10-116.85) had been met, reckon upside would be limited to 199.80-90 (61.8% Fibonacci retracement) and bring wave (V) decline in later part of 2017.
