USD/JPY is expected to trade with a bearish bias. US indices were depressure during August's last trading day, with the Dow Jones Industrial Average losing 0.7% to close at 16528, the S&P 500 declining 0.8% to 1972, and the Nasdaq Composite dropping 1.1% to 4776.51. Crude prices surged 8.8% to $49.20 a barrel, while gold slipped 0.1% to $1131 an ounce and the 10-year Treasury yield inched up to 2.204% from 2.188% in the previous session.The US Purchasing Manager Index fell to 54.4 in August from 54.7 in July, while the Dallas Fed Manufacturing Outlook dropped to -15.8 in August from -4.6. At the same time, the US dollar countinued to rise against its Australian and New Zealand rivals (AUD/USD touched as low as 0.7078, NZD/USD 0.6316), but weakened against the Canadian dollar amid strong crude prices (USD/CAD once sank to 1.3112). The USD/JPY pair keeps trading on the upside of the key support at 120.60. It is around the overlapping 20- and 50-period intraday moving averages (MAs). However, the intraday RSI is below the neutrality level of 50. While the pair may post consolidation, the consolidation extent should be limited in view of strong support provided by 119.20. The first downside target is set at 119.20.

Trading recommendations:

The pair is trading below its pivot point. It is likely to trade in a lower range as long as it remains below the pivot point. Short positions are recommended with the first target at 119.20. A break of that target will move the pair further downwards to 118.85. The pivot point stands at 120.65. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, long positions are recommended with the first target at 121.05 and the second target at 121.40.

Resistance levels: 121.05 121.40 121.75

Support levels: 119.20 118.85 118.45