GBP/JPY has gone up a long way from Jun 2012 where price was around 120.0. Since then price has reached a high of 155.0 in under 12 months, gaining close to 30% from peak to trough within this period. However, things were never a straightforward smooth ride with price facing an extended period of consolidation between 140 - 148 thereabouts from Jan to Mar 2013. Price managed to break above the 148.0 level following the actual declaration of 2013 stimulus package by Kuroda's 1st monetary policy briefing as the Governor of BOJ back in April, sending price to that 150s region. That itself wasn't wasn't a smooth ride either, with price retreating back below 148.0 during Mid april, before ultimately pushing up higher to the 155.0 level.
It is within this laborious backdrop where we find ourselves right now. Yes, price is certainly remaining bullish. However we need to realize that traders believing that GBP/JPY will be able to fly to 160.0 easily are gravely mistaken. The way towards higher grounds is most likely going to be bumpy one, with numerous dips along the way, and one dip appears to be under way right now.
Despite trading below the 153.25 swing highs back on 12th and 26th April, the case of a Triple Top just doesn't feel right. The lower rising trendline will be expected to provide support within this bullish narrative, and price may be able to bounce higher and test 155.0 or perhaps higher on the rebound. Some may also argue that a Head and Shoulder (Shrugged shoulders) case may be put forward, with the lower rising trendline as neckline. Stochastic reading seems to agree with such a scenario with both Stoch/Signal lines pointing lower, and Stoch line peeking below the 80.0 mark. However such assertions require a break below the neckline for confirmation, and even so, it is likely that 150.0 may provide significant support together, with 140 - 145 another thick level of support which may put off even the staunchest bears.
Under current bullish bias, such a bold move lower would really require a tremendous shift in overall sentiment, most likely inspired by truly shocking fundamental events - e.g. BOJ rescind on their stimulus package, or ultimate collapse of stock market resulting in huge risk appetite vacuum etc. The possibility is certainly there, but it is also pretty apparent that such events will certainly not go unnoticed (should it happen) given today's internet information age. Hence, any discussion of topping becomes moot. In fact, we only need to look at price action between 140 - 148 to find out how a seemingly perfect Head and Shoulders Top pattern get invalidated so easily under the bullish might, which makes taking shorts now a risky affair.
That is not saying that price cannot go down, far from it. We've previously established that there are certainly dips to be expected along the way, and there is also no telling how far the dips can actually go before bullish momentum takes over again. Looking at current short-term price, we can see that price is being pushed lower since the start of the week, with current downward trendline adding pressure for a test of 152.7 interim resistance turned support. Price may find stronger support around 152 - 152.5, which is to confluence of 3rd May's consolidation and lower rising trendline seen from Daily Chart.
Stochastic reading suggest that price may move higher with the possibility of breaking the descending trendline, but it is also possible that an interim peak can be found here considering that previous Stoch peaks have been form around the 50.0 mark.
GBP/USD Daily Chart
It goes without saying that GBP/USD will also hold a strong influence over GBP/JPY. Price is still on the rise for GBP/USD, with the rising channel still intact. However overall bearish outlook remain as the move from 1.64 lower hasn't been invalidated yet. Ideally price should clear the 1.56 Channel Top and 50.0% Fib retracement to inspire further bullish momentum, but instead of doing it, it seems that Channel resistance is holding nicely, opening up a move towards Channel bottom. 1.54 and confluence with the 38.2% Fib retracement may provide some support, which agrees with the overall bullish GBP/JPY outlook, but nonetheless implicitly agreeing that a move lower for GBP/JPY right now is possible.
With Bank of England rate decision coming up in a few hours time, it is unlikely that we will see strong movements from now till then as speculators may wish to wait for the risk event to be over before committing once again. Regardless of the results, it is unlikely that the BOE decision can be the strong fundamental game changer needed to displace current GBP/JPY bullish bias. As such, even if price dips due to rate cuts (unlikely) or additional easing, traders need to be mindful of the overall bullish narrative and determine if price has legs to run lower further before committing heavily into a bearish scenario.
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