GBP/JPY reversed after recovery to 144.36 last week and breached 141.15 on subsequent fall. The development suggests that corrective fall from 147.95 short term top is resuming. Initial bias is mildly on the downside this week for 38.2% retracement of 126.54 to 147.95 at 139.77. At this point, we’d expect strong support from 139.31/77 to bring rebound. But in any case, risk will stay on the downside as long as 144.36 resistance holds, in case of recovery. Sustained break of 139.77 will pave the way to 61.8% retracement at 134.71.
In the bigger picture, rise from 126.54 could either be the third leg of the consolidation pattern from 122.75 (2016 low), or the start of a new up trend. In either case, further rally is expected as long as 139.31 support holds, into 148.87/156.59 resistance zone. Reaction from there should reveal which case it should be in. However, sustained break of 139.31 support will dampen this case and turn medium term outlook neutral first.
In the longer term picture, in spite of the current strong rally, there is no confirmation of long term bullish reversal yet. Focus is now on 156.59 key resistance. As long as it holds, another decline through 122.75 could still be seen. But firm break of 156.69 should at least bring further rally to 61.8% retracement of 195.86 to 122.75 at 167.93.