USD/JPY kept selling off in the past few trading days as the Nikkei stock index posted sharp declines. This was enough to push USD/JPY back down from the 103.75 area to 99.50.

This level coincides with a former resistance level, right after the BOJ implemented its massive QE program. It could act as support from now on since it lines up with the 61.8% Fibonacci retracement level.

Stochastic is moving out of the oversold region, suggesting that the selloff is overdone and that the pair could head back to its recent highs. A stop below the previous day low of 98.86 and a target around 103.00 would be a good reward-to-risk ratio for a short-term play.

By Kate Curtis from Trader’s Way