GBP/JPY Weekly Outlook - January 5th to 9th, 2015
GBP/JPY had remained in a narrow sideways mode during last to last week. Last week it broke below that range before trying to recover again. However during the last Friday then pair fell sharply to go as low as184.31 before closing for the week at 184.69.
The fall from 189.72 was natural because of the psychological resistance of the approaching 190.00. However the last week's fall was significant as it not only broke the 55-day EMA support but the weekly closing was below that support level. It was also more significant as the psychological support of 185.00 did not hold. Considering these facts we expect that a near-term topping may already have taken place at 189.72 and further consolidation should be on the way.
On the upside the first level of resistance is expected at or below 185.55. Any decisive break of this support should bring some more gains towards the second level of support in the range of 186.20 to the recent 186.32. With these resistance holding, we would expected the downward consolidation to extend for a retest of the recent 181.61 and even to 181.43. Please note that 181.43 is the 38.2% retracement of the gains from 168.02 to 189.72. A strong support is expected here because of the approaching psychological ranges of 180.00.
With the above mentioned supports holding, any decisive break over 186.32 should bring another resistance near 187.75 which was the high of December 11, 2014. In case that resistance fails then a retest of the recent high i.e. 189.72 will be expected.
From the longer-term perspective, during November 2013, the break over 163.07 had indicated a bottoming after the great fall of 2008/2009. moves when that resistance had turned into support go in favor of that outlook. When GBP/JPY had touched 183.96, it had completed the 50% retracement of the great fall from 251.09 of mid-2007 to 116.84. The recent correction came well ahead of the 61.8% retracement which is at 199.80. Hence, once the downward correction is over, a break over the recent 189.72 should make GBP/JPY target that level.
Analyze Yourself - Various views of GBP/JPY Price-Action