Bottom line:  GBPJPY corrective phase still continues as potential Wave 4 termination could see 139.50 levels, going forward.

Technical Analysis:

GBPJPY bulls are seen taking a break since 148.00 highs, and it could find interim bottom around 139.50, the previous Wave iv termination as labelled here. The structure since 126.50 lows on August 12, 2019 has unfolded as follows: Wave 1 towards 130.69, followed by Wave 2 lower towards 126.67 and an extended Wave 3 up to 148.00 on December 13, 2019 respectively. Wave 3 can be clearly seen to have sub divided into 5 waves classified as an extension here. Ideally, a corrective drop towards 139.50 can be expected to terminate as Wave 4, before Wave 5 resumes higher again. If the above counts are correct, we can expect a bullish turn from around fibonacci 0.382 retracement of Wave 3 as displayed here. Alternately, if GBPJPY continues to drop lower towards 131.00, it would confirm that the previous rally was corrective. If the alternate scenario unfolds, prices could continue to drop below 126.50, going forward. At this moment, probabilities remain high for a Wave 4 termination towards 139.50, followed by a rally as Wave 5 unfolds higher again. Hence, a high probability trade direction from here is lower towards 139.50, then higher above 148.00. Opportunities are seen on both sides but a conservative approach is to remain flat for now and look to buy around 139.50, towards a potential target above 148.00. Aggressive short positions towards 139.50 should be with strict stops above 144.50, since the larger trend is up. Please also note that the corrective drop may extend towards 137.50 levels, before Wave 4 terminates. Hence it is a good strategy to show restraint towards any impulsive buying at the moment. Corrective Waves A and C become equal at 137.50, and a turn can be expected then.

Prepared by

Harsh Japee, Technical Analyst.

GBPJPY Chart

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