GBP/JPY Price Forecast: Pound's rally stalls below 205.00

• The Pound edges lower on Thursday after failing to consolidate above 205.00.
• The broader trend remains bullish, with the Yen battered amid expectations of a looser fiscal policy in Japan.
• GBP/JPY looks set for a bearish correction, targeting 203.00 and 202.10

The British Pound appreciated nearly 3% this week, but the rally seems to be losing momentum on Thursday. The pair has failed to consolidate above 20500 and technical indicators are turning lower, suggesting a potential correction.

The Pound surged on Yen weakness as the victory of Sanae Takaichi in the ruling party's elections over the weekend, boosted speculation of a looser fiscal policy and dampened expectations of immediate BoJ tightening

Technical analysis: A bearish correction might be ahead

The technical picture shows all the ingredients for a bearish correction. The pair has reached strongly overbought levels at most timeframes, and the 4-Hour Moving Average Convergence Divergence (MACD) has crossed below the signal line, suggesting an increasing bearish pressure.

Bears are pushing against the intraday highs of 204.34 at the time of writing. Further down, the intra-day high at the 203.00 area, and the October 7 low, near 202.10, emerge as the next bearish targets.

To the upside, immediate resistance is at Wednesday's high of 205.35. Trendline resistance is at 206.15, and the 161.8% Fibonacci retracement of the October 7 - 8 rally is at 207.56.