GBP/JPY’s rally from 131 51 accelerated to as high as 148.57 last week before forming a temporary top and retreated. Initial bias is neutral this week for some consolidation first. Downside of retreat should be contained by 144.84 resistance turned support to bring rise resumption. On the upside, break of 148.57 will target 149.48 resistance first. Decisive break there will target 100% projection of 131.51 to 144.84 from 141.00 at 154.33 next.
In the bigger picture, the strong rebound from 131.51 suggests that medium term fall from 156.59 (2018 high) has completed already. The corrective structure of such decline in turn argues that it’s the second leg of the corrective pattern from 122.36 (2016 low). And this pattern is starting the third leg. On the upside, decisive break of 149.48 will pave the way 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.
