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  • GBP/JPY is in bearish technical conditions and short term focus is the downside. 
  • From a monthly perspective, there are still prospects of an upside extension to meet heavy supply. 

GBP/JPY bears are lurking on the lower time frames in the hunt for a restest of daily structure protecting the 144 figure.

The following is a top-down analysis that illustrates where the next trading opportunity could be derived from an hourly test of resistance and a capitulation of the bulls.  

Monthly chart

The monthly chart offers a downside target as the prior spike highs at 142.78. However, the W-formation may still have some work to do on the upside into deeper supply.

That being said, the bearish prospects on the lower time frames, for the meanwhile, at least, are powerful.

Weekly chart

The price is struggling following a series of consecutive weeks of higher closes. Such a rally would be expected to stall and correct.

The presumed support would be prior resistance and the confluence of the 38.2% Fibo, 142.84 and 31 Aug highs 142.71 is compelling.

Daily chart

144.10 as prior highs looking left has a confluence with the 38.25 Fibonacci retracements of the bullish impulse.  

The recent low was 144.04, but there is potential for a restest and a possible break lower into a deeper retracement.

Such a move would open prospects of the 50% mean reversion at 143.90 ahead of a 61.8% Fibonacci retracement at 143.65 guarding a weekly 38.25 Fibo target of 142.84.

Hourly chart

As can be seen, the price is in bearish conditions on the hourly chart. 

However, there is a series of the support structure and still, there is the potential for the price to rise deeper into the resistance area.

This zone is made up of a confluence of the 21-moving average, dynamic trendline resistance and the prior lows.

That being said, given the bearish trend, the resistance would be expected to hold and send the price back towards the daily support of the 144.10 level.

A break of the recent lows, 144.04, opens risk to the said levels, 143.65/90.