Overview:

USD/JPY is expected to consolidate in a lower range after hitting a seven-month high at 104.49 on Monday. USD/JPY is undermined by the disappointing U.S. data. For example, new home sales unexpectedly fell 2.4% on month to 412,000 in July (defying forecast for 4.7% increase to 425,000); Dallas Fed business activity index dropped to 7.1 in August from 12.7 in July; Markit flash August U.S. services PMI came is lower at 58.5 versus July's final reading of 60.8. USD/JPY is also weighed by the lower longer-dated U.S. Treasury yields (10-year at 2.383% versus% 2.403% late Friday), Japanese export sales, JPY demand on retreating yen crosses amid diminished risk appetite (VIX fear gauge rose 2.01% to 11.7) even as S&P 500 closed up 0.48% at 1,997.92 on dovish comments from ECB President Draghi. But USD/JPY losses are tempered by the demand from Japanese importers and higher shorter-dated U.S. Treasury yields (more policy-sensitive 2-year yield at 0.504% versus 0.492% late Friday) as less-dovish-than-expected speech from Federal Reserve chairwoman Janet Yellen at Jackson Hole on Friday kept alive speculation the Fed could raise rates sooner than expected.

Technical comment:
Daily chart is mixed as MACD is bullish, five and 15-day moving averages are advancing, but stochastics is turning bearish to the overbought zone.

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 104.25 and the second target at 104.50. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.40. A break of this target would push the pair further downwards and one may expect the second target at 103. The pivot point is at 103.65.

Resistance levels:
104.25
104.50
104.80

Support levels:
103.40
103
102.70