After that strong rally that lasted for nearly a couple of months and more than a thousand pips, USD/JPY seems to be in the mood for a major correction.

On the 4-hour time frame, the pair is pulling back to the 99.50 to 100.00 area, which acted as resistance in the past. This is in line with the 61.8% to 50% Fibonacci retracement levels, which could act as support from now on.

Stochastic is already in the oversold region, suggesting that USD/JPY could rebound soon. The oscillator has also made a bullish divergence from the lows at the start of May.

The BOJ has made no changes to their current monetary policy scheme while the Fed has expressed intention to scale down their bond purchases within the year. This should keep USD/JPY supported in the near term.

By Kate Curtis from Trader’s Way