GBP/JPY – 146.05
Sterling’s anticipated selloff to 141.25 (last week’s low) adds credence to our view that temporary top has been formed at 147.75 last month and although price has rebounded this week, reckon upside would be limited to 144.40-50 and price should falter below resistance at 145.30, bring another decline later this month. Below said support at 141.25 would signal the fall from 147.75 top is still in progress for correction of early upmove to 140.50 then towards psychological support at 140.00, however, near term oversold condition should limit downside to 139.85 support and price should stay well above previous chart support at 138.70.
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 upside, although current rebound from 141.25 may bring initial recovery to 143.30-35 and possibly 144.00, reckon upside would be limited to 144.50-60 and bring another decline to aforesaid downside targets. Above 145.30 would dampen this bearish scenario and suggest first leg of decline from 147.75 has ended instead, bring a stronger rebound d to 145.90-0-0 but price should falter below resistance at 146.80, bring another decline later.
Recommendation: Short entered at 146.50 met target at 144.50 with 200 points profit and would sell again at 144.50 for 141.50 with stop above 145.50.
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.
