Fundamental outlook:
USD/JPY is expected to trade in a lower range. Liquidity was thin in Asia today as financial markets in Japan were shut for a public holiday. USD/JPY is undermined by weaker USD sentiment (ICE spot dollar index last 95.10 versus 95.44 early Tuesday) after much wider-than-expected US March trade deficit of $51.37 billion (versus forecast $42.5 billion). USD/JPY is also weighed by the flows to haven JPY amid increased risk aversion (VIX fear gauge rose 11.36% to 14.31, S&P 500 closed 1.18% lower at 2,089.46 overnight) on weak trade data from the US, sharp 4.06% decline in the Shanghai Composite Index on Tuesday, and concerns about Greece's standoff with its creditors. But USD sentiment is soothed by an unexpected rise in the US ISM non-manufacturing PMI to 57.8 in April from 56.5 in March (versus forecast for drop to 56.3). USD/JPY losses are also tempered by higher US Treasury yields (10-year at 2.181% versus 2.135% late Monday) and sell-yen orders from Japan importers.

Technical comment:
The daily chart mixed as the MACD bullish, five-day moving average above 15-day moving average and advancing; but stochastics are turning bearish near overbought levels. Bearish outside-day-range pattern was completed on Tuesday.

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 120.25 and the second target at 120.50. In the alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 119.40. A break of this target is likely to push the pair further downwards, and one may expect the second target at 119. The pivot point is at 119.80.

Resistance levels:
120.50
120.75
121

Support levels:
119.40
119
118.75