GBP/JPY's rally from 120.82 extended last week and reached as high as 127.25. Initial bias remains on the upside and the current rebound from 118.81 should continue to 100% projection of 118.82 to 125.82 from 120.82 at 127.82 next. On the downside, break of 124.41 support is needed to signal short term topping. Otherwise, outlook will stay bullish even in case of retreat.

In the bigger picture, at this point, we'd like to maintain that price actions from 116.83 are corrective in nature so far. Rise from 118.82 could be the third leg of the pattern from 116.83 and might target 133.48 and above. But this is far from being certain. After all, the likely scenario is that we'll see more range trading between 116.83 and 140.02 (50% retracement of 163.05 to 116.83 at 139.94) ahead, before an eventual downside breakout. We'll favor this view as long as 140.02 resistance holds.

In the longer term picture, fall from 251.09 is treated as resumption of multi decade down trend. Current development gives no indication of medium term reversal yet and GBP/JPY would likely drop towards 100 psychological level on down trend resumption.

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