USD/JPY is expected to consolidate with bullish bias after hitting the three-week high of 123.97 on Wednesday. It is underpinned by the positive dollar sentiment (ICE spot dollar index last 97.13 versus 96.60 early Wednesday) after Federal Reserve Chairwoman Yellen reaffirmed that the central bank remained on a path to raising its interest rates this year in her semi-annual testimony before the House Financial Services Committee. The pair is also boosted by a higher-than-expected 0.4% on-month rise in the US June PPI (versus forecast +0.2%), the healthier-than-expected US July Empire State manufacturing index of 3.9 (versus forecast 3.0), and a stronger-than-expected 0.3% on-month increase in the US June industrial production (forecast +0.2%) and capacity utilization of 78.4% (versus forecast 78.1%). USD/JPY is also supported by the demand from Japan's importers and the Bank of Japan's ultra-loose monetary policy. But USD/JPY gains are tempered by the Japanese exports and lower US Treasury yields (10-year slipped 4.3 bps to 2.355% Wednesday).

Technical comment:

The daily chart is positive-biased as the MACD and stochastics are bullish, five-day moving average is above 15-day moving average and is advancing.

Trading recommendations:

The pair is trading above its pivot point. It is likely to trade in a wider range as long 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 124.35 and the second target at 124.60. In the alternative scenario, short positions are recommended with the first target at 123.25 if the price moves below its pivot points. A break of this target is likely to push the pair further downwards, and one may expect the second target at 122.85. The pivot point is at 123.60.

Resistance levels: 124.35 124.60 135

Support levels: 123.85 122.85 122.40