USD/JPY is expected to trade with bullish bias. On Friday, US stocks dropped over 1% as retail sales edged up just 0.1% in October (vs +0.3% expected) and oil kept sinking toward the $40.00 a barrel level (Nymex crude down 2.4% to $40.74 a barrel). The Dow Jones Industrial Average fell 1.2% to 17,245, the S&P 500 lost 1.1% to 2,023, and the Nasdaq Composite was down 1.5% to 4,927. Meanwhile, the benchmark 10-year Treasury yield settled at 2.280%, down from 2.313% in the previous session, while gold edged down 0.1% to $1,083 a troy ounce.

The US dollar gained against the euro as the eurozone posted weaker-than-expected numbers for growth over the third quarter. EUR/USD declined 0.4% to 1.0777. This morning the pair plunged to the 1.0720 level, producing a bearish gap following Friday's terrorist attacks in Paris. The pair has entered a consolidation phase after rising to as high as 123.15. It is currently trading below the 20-period intraday MA and the intraday RSI is below the neutrality level at 50. As long as the level of 122.70 (around the low of Nov. 12) holds as the key support, the consolidation's extent should be limited. The first upside target is still set at 123.40 and the second one at 123.60.

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 23.40 and the second target at 123.60. In the alternative scenario, short positions are recommended with the first target at 122.30 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. The pivot point is at 122.70.

Resistance levels: 123.40 123.60 124

Support levels: 122.30 122 121.60