AUDJPY - Deeper pullback or retesting strong support?These are the 2 scenarios that I see for AUDJPY on the 4h timeframe.
Scenario 1 - Deeper Pullback and Continuation:
In this scenario, the price could initially drop further from current levels around 96.24, potentially reaching the 95.50 area, forming a deeper pullback. This move would shake out some weak longs and create a stronger base for the next move up. After this deeper correction, the pair could find strong buying interest and initiate a significant bounce, potentially targeting the recent highs around 98.50-99.00. This scenario would align with the overall consolidation pattern we've seen in recent months.
Scenario 2 - Orange Box Retest:
The alternative scenario shows price moving down to retest the orange box support zone around 94.00. This would represent a more bearish development, as it would mean breaking below the recent swing lows. The orange box appears to be a significant support area, and reaching this level could trigger one of two responses: either a strong bounce from this major support zone, or if the support breaks, it could lead to a more substantial decline. The reaction at this zone would be crucial for determining the pair's medium-term direction.
Both scenarios suggest some downside in the near term, with the key difference being the depth of the pullback and the subsequent reaction at these lower levels.
