Fundamental Outlook:
USD/JPY is expected to consolidate with bullish bias after hitting almost a three-week high of 120.21 this morning. USD/JPY is underpinned by the bullish dollar sentiment (ICE spot dollar index hit 11-year high 95.514 Monday, last 95.49 versus 95.45 early Monday) and the higher US Treasury yields (10-year at 2.085% versus 2.002% late Friday) as expectations prevail that the Federal Reserve could raise interest rates as early as midyear. The pair is also boosted by a rise in the US core PCE price index for January by 0.1% on-month and by 1.3% on-year, while the US ISM manufacturing PMI for February came in at 52.9, roughly meeting forecast of 53.0. USD/JPY is also supported by demand from Japan's importers, the ultra-loose Bank of Japan's monetary policy, and yen-funded carry trades amid positive investor risk appetite (VIX fear gauge eased 2.25% to 13.04; S&P 500 closed up 0.61% at 2,117.39 overnight). But the USD sentiment is dented by the surprise 1.1% on-month drop in the US January construction spending (versus forecast +0.1%), the bigger-than-expected 0.2% on-month drop in the US January personal spending (versus forecast -0.1%), and the smaller-than-expected 0.3% increase in the U. January personal income (versus forecast +0.4%). The USD/JPY gains are also tempered by the Japanese exports.

Technical comment:
The daily chart is positive-biased as the MACD and stochastics are bullish, five- and 15-day moving averages are rising.

Trading recommendations:
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 long as the price is keeping above its pivot point, a long position is recommended with the first target at 120 and the second target at 120.35. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 119.60. A break of this target would push the pair further downwards, and one may expect the second target at 118.60. The pivot point is at 119.50.

Resistance levels:
120
120.35
120.75
Support levels:
119.10
118.60
118.25