AUD/JPY recently made a strong break and sustained rally past the 94.00 major psychological level but it appears that a quick correction might take place. The pair has retreated upon reaching the 96.00 major psychological resistance and might bounce off the Fibonacci retracement levels on the 4-hour time frame.
The 50% Fibonacci level is closest in line with the former resistance at the 94.00 mark. However, stochastic is already in the oversold region, indicating that Aussie bulls are ready to push the pair back up. A shallow retracement to the 38.2% Fibonacci level might happen, as this is also in line with the rising trend line connecting the lows of the price.
Going long at 94.00 with a stop below the 61.8% Fib level and a target of the previous highs could yield a 2:1 return on risk. Aiming higher and adding positions on the break of the previous high could improve the potential reward.
By Kate Curtis from Trader’s Way