USD/JPY is expected to trade in a lower range as key resistance is seen at 121.35. Last Friday, the US stock indexes tumbled as energy and materials shares sank on falling oil prices. Investors were cautious over how financial markets would react after this week's Federal Reserve meeting. Nymex crude oil plunged 3.1% to $35.62 a barrel. The Dow Jones Industrial Average fell 1.8% to 17,265, the S&P 500 lost 1.9% to 2,012, and the Nasdaq Composite was down 2.2% to 4,933.

Meanwhile, investors piled into the safety of the US government bonds, driving the benchmark 10-year Treasury yield down to 2.139% from 2.239% on Thursday. And gold was up by 0.3% to $1,074 an ounce.

Boosted by falling oil prices, USD/CAD chalked fresh 11-year highs and rose 1.0% to $1.3754. Also, the US dollar strengthened against other commodity-related currencies. AUD/USD dropped 1.3% to 0.7186 and NZD/USD was down 0.5% to 0.6719. On the other hand, EUR/USD rose 0.4% to 1.0987 and USD/JPY dropped 0.6% to a 5-week closing low of 120.86.

The pair fell to as low as 120.55 last Friday. Currently, it keeps trading on the downside and is around the 20-period (30-minute chart) moving average, which is below the 50-period one. Meanwhile, the relative strength index remains below the neutrality level of 50 lacking upward momentum. The first downside target at 120.50 (last Friday's low) is in sight and a breakout below this level would open a path toward 120.15 (last seen on October 28).

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 120.50. A break of that target will move the pair further downwards to 120.15. The pivot point stands at 121.35. 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 121.85 and the second target at 122.25.

Resistance levels: 121.85 122.25 122.70

Support levels: 120.50 120.15 119.75