Fundamental Outlook:

USD/JPY is expected to consolidate with risks skewed lower after hitting almost a three-week high 120.27 on Tuesday. USD/JPY is undermined by the comments from Etsuro Honda, economic adviser to Prime Minister Abe, that Japan's central bank should hold fire on extra easing measures for some time to ensure the economy doesn't "overheat," and that the present dollar-yen levels may be at a "kind of upper limit in the exchange rate's comfort zone." USD/JPY is also weighed by the Japanese exports, unwinding of the JPY-funded carry trades amid decreased risk appetite (VIX fear gauge rose 6.29% to 13.86, S&P 500 closed 0.45% lower at 2,107.78 overnight). But the dollar sentiment is soothed by a jump in the US ISM-NY business conditions index to 63.1 in February from 44.5 in January and a rise in the US IBD/TIPP economic optimism index to 49.1 in March from 47.5 in February. The USD/JPY losses are also tempered by the higher US Treasury yields (10-year at 2.126% versus 2.084% late Monday), demand from Japan's importers and the ultra-loose Bank of Japan's monetary policy and expectations that the Federal Reserve could raise interest rates in the middle of the year.

Technical comment:
The daily chart is mixed as the MACD and stochastics are bullish. Five-day moving average is above 15-day moving average and is advancing, but bearish outside-day-range pattern was completed on Tuesday.

Trading recommendations:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below the pivot point. Short positions are recommended with the first target at 119.10. A break of that target will move the pair further downwards to 118.60. The pivot point stands at 120. 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, a long position is recommended with the first target at 120.35 and the second target at 120.60.

Resistance levels:
120.35
120.75
121
Support levels:
119.10
118.60
118.25