Fundamental Overview: USD/JPY is expected to consolidate with bullish bias after hitting the 2.5-month high of 121.60 this morning. Liquidity was thin as financial markets in the US and the UK were shut for public holidays. USD/JPY is underpinned by the positive dollar sentiment (ICE spot dollar index last 96.18 versus 95.39 early Friday) after higher-than-expected US core CPI of +0.3% on-month in April that was the largest increase since January 2013 (versus forecast +0.2%). Fed Chairwoman Yellen reiterated the US central bank is on track to raise short-term interest rates this year. USD/JPY is also supported by the higher US Treasury yields (2-year at 0.626% versus 0.577% late Thursday), demand from Japan's importers, and the ultra-loose Bank of Japan's monetary policy. But USD/JPY gains are tempered by the Japanese exports and diminished investor risk appetite (S&P 500 closed 0.22% lower at 2,126.06 Friday).

Technical comment: The daily chart is positive-biased as bullish outside-day-range pattern was completed on Friday. The MACD is bullish; stochastics stays elevated at overbought levels; 5- and 15-day moving averages are 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 122 and the second target at 122.40. In the alternative scenario, short positions are recommended with the first target at 120.60 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 120.30. The pivot point is at 121.

Resistance levels: 122 122.40 123

Support levels: 120.60 120.30 120