Overview:

USD/JPY is expected to consolidate after hitting three-week high at 103.44 on Monday. It is undermined by the weaker dollar sentiment (ICE spot dollar index last 80.10 versus 80.19 early Monday) on the surprise drop in the U.S. ISM-Chicago PMI to 55.9 in March from 59.8 in February (versus forecast for rise to 60.0) and comments from Fed's Chairwoman Yellen soothing concerns over higher interest rates. Yellen said that there is still substantial slack in the economy, holding down inflation and giving room for the central bank to keep interest rates lower for longer time, and that the Fed will continue its "extraordinary" support in place for "some time to come." USD/JPY is also weighed by Japan's export. But USD/JPY downside is limited by the demand from Japan importers, loose monetary policy of the Bank of Japan and yen-funded carry trades as Yellen's comments boost investor risk sentiment (VIX fear gauge eased 3.68% to 13.88; S&P rose 0.79% overnight).

Technical сomment:
Daily chart is still positive-biased as MACD and stochastics is bullish, five-day moving average is above 15-day MA and is advancing.

Trading recommendation:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As far as the price is above its pivot point, a long position is recommended with the first target at 103.75 and the second target at 104. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 102.65. A breach of this target will push the pair further downwards and one may expect the second target at 102.40. The pivot point is at 102.95.

Resistance levels:
103.75
104
104.25

Support levels:
102.65
102.40
101.90