AUD/JPY Retracement Setup (May 27, 2014)
AUD/JPY recently made a strong break below a support level and may be ready for a quick retracement before resuming its drop. The pair previously found support at the 94.50 minor psychological level and the break took it down to the 93.00 level.
A pullback to the 50% Fibonacci level, which is in line with the former support at 94.50, could put the pair back in selloff mode. Take note though that a spike higher earlier this week lasted past the 61.8% Fib, which might be a good area to set a stop loss.
Shorting at 94.50 with a stop at 95.50 and a target of 93.00 could yield a 1.5-to-1 return on risk. Stochastic is already in the overbought zone, indicating that a selloff might take place sooner or later.
By Kate Curtis from Trader's Way