USD/JPY might be in for a quick pullback to an area of interest before resuming its rally. The pair recently broke above the 102.50 minor psychological level, which has been holding as resistance in the past month.

The broken resistance zone is somewhere between the 50% and 38.2% Fibonacci retracement levels on the latest swing high and low on the 1-hour time frame. This might serve as a turnaround point from the pair’s recent retracement. Stochastic is pointing up but hasn’t reached the oversold region yet, which means the pair has room to dip a little lower before bouncing.

Going long at the 102.50 level with a  stop below the 61.8% Fib level and a target of new highs could yield a good return on risk for a short-term trade. To protect profits, the stop can be adjusted to entry once price tests the previous highs around 103.70.

By Kate Curtis from Trader’s Way