AUDJPY recently made a strong break past the 96.00 major psychological resistance level, which has acted as a long-term ceiling for price rallies. This could be a sign that more gains are in the cards for the pair, but a correction might take place first before it heads further north.
Using the Fibonacci retracement tool on the latest swing high and low shows that the 38.2% level lines up with the 96.00 mark, which might serve as support moving forward. Stochastic is making its way in the oversold zone, which is a sign that buying momentum could return soon.
Going long at the 96.00 mark with a stop below the 61.8% Fib or the 95.00 handle and a target of new highs near 98.00 or higher could yield at least a 2:1 return on risk. A market entry could also work if stochastic crosses above the oversold area early, hinting that the climb could resume right away.
Adjusting the stop to entry once price hits the 97.00 mark or previous highs could be a good way to minimize exposure or lock in gains. Adding on the break of the previous highs could improve the return on risk.
By Kate Curtis from Trader’s Way