Fundamental Outlook:
USD/JPY is to trade in higher range. It is underpinned by the improved dollar sentiment (ICE spot dollar index last 97.07 versus 96.63 early Monday) after the US ISM non-manufacturing March report pointed to a brighter growth outlook. The non-manufacturing PMI unexpectedly slipped to 56.5 from 56.9 in February (versus forecast 56.9), but the ISM's non-manufacturing employment index rose to 56.6 in March from 56.4 in February, the new orders index increased to 57.8 in March from 56.7 in February, while the export index jumped to 59.0 from 53.0. Also, Fed's Dudley said the soft patch in the US economy was likely caused in large part by temporary factors such as the harsh winter. USD/JPY is also supported by the higher US Treasury yields (10-year at 1.898% versus 1.841% late Friday); reduced safe-haven appeal of the yen as risk sentiment improves (S&P 500 closed up 0.66% at 2,080.62 overnight), demand from Japan importers and ultra-loose Bank of Japan's monetary policy. But USD/JPY gains are tempered by the Japan exporter sales.

Technical comment:
The daily chart is mixed as the MACD and stochastics are in bearish mode, but five-day moving average is meandering sideways below declining 15-day moving average, the inside-day-range pattern was completed on Monday.

Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a wider range as far as it remains above its pivot point. As long as the price holds above its pivot point, long positions are recommended with the first target at 120.35 and the second target at 120.80. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 118.35. A break of this target is likely to push the pair further downwards, and one may expect the second target at 117.60. The pivot point is at 119.05.

Resistance levels:
120.35
120.80
121.35

Support levels:
118.35
117.60
117.25