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GBP/JPY - ABC Correction Scenario

The GBP/JPY is a bullish pair when looking at the daily chart, though you can argue that it has been in more of a consolidation mode throughout 2014. Even so, GBP/JPY has kept the bullish bias, and has pushed to a fresh high on the year at 175.33. Price action remains choppy, but also remains above the 200-, 100-, 50-day simple moving averages. The latest RSI action was a pop above 70. If it can hold above 40, the bullish momentum is maintained. 

(GBP/JPY Daily Chart, 7/21)

With the bullish outlook in the daily chart intact, let's take a look a the 4H chart. 

We are seeing a bearish correction taking place. There is slight bearish momentum in the 4H chart as the RSI has come close to 30, and has held mostly below 60. Price has fallen below the 200-, 100-, and 50- SMAs. 

There looks like there could be some further downside risk in the near-term. If the current downswing extends, look for support at:
1) 172.50: 50% retracement and support/resistance pivot area. Around 172.50, it is possible price will also be challenged by the rising trendline shown in the daily chart. 
2) 172.10-20: If price completes an ABC correction, with leg C = A, then the projection for the current swing is to around 172.15. 

An additional case for buyers at these support levels will be the RSI dipping below 30 than developing a bullish divergence around 30. 

If price indeed bounces back up after the current bearish correction, a break above a support/resistance pivot at 174 can bring in more bullish confidence. A rally above 174 would also clear the moving averages in the 4H chart and a falling trendline seen in this time-frame.

(GBP/JPY 4H Chart, 7/21)

If price falls below 171.75, 61.8% retracement. Then we have to consider the consolidation scenario and consider sellers waiting to fade a rally. In this scenario, we will want to see how the market reacts around 170. If it holds above 170, there is still bullish bias in the neutral mode. Below 170, we lose that bullish bias and the GBP/JPY would remain in consolidation.