USD/JPY has been on a strong rally lately after breaking above the consolidation pattern below the 102.50 minor psychological resistance. The pair seems close to testing another resistance level again, this time on top of the rising channel on its 4-hour time frame.

Stochastic is already in the overbought zone, indicating that bears are ready to push the pair back down. Resistance is located around the 103.50 minor psychological level.

Shorting at 103.50 with a stop above the 104.00 round number and a target at the mid-channel resistance could be a 2:1 return on risk. Aiming for the bottom of the channel around 101.75 could offer a better risk-reward ratio but it would be prudent to adjust the stop to entry once price reaches the middle of the channel.

By Kate Curtis from Trader’s Way