USD/JPY just broke below a key support level, as dollar weakness continued to dominate price action in yesterday’s trading. After that strong drop though, USD/JPY might retrace for a bit before heading any lower.

The Fibonacci retracement levels on the recent swing high and low on the 1-hour time frame show that the 38.2% level lines up with the broken support at 97.70. Stochastic has already reached the oversold region and moved up, suggesting that dollar bears might need to catch their breath first.

A short trade at 97.70 with a stop above the 61.8% Fib and a target of the previous lows near 96.25 would yield a 1:1 reward to risk ratio.

By Kate Curtis from Trader’s Way.