Fundamental Outlook:
USD/JPY is expected to consolidate in a lower range after hitting a 7.5-year high of 122.04 on EBS on Tuesday. USD/JPY is undermined by the flows to the safe-haven yen and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 10.82% to 16.69, S&P 500 closed 1.7% lower at 2,044.16 overnight) as worries rise that the Federal Reserve will start its withdrawal of monetary stimulus midyear. USD/JPY is also weighed by the lower US Treasury yields (10-year at 2.121% versus 2.195% late Monday) and Japan's exports. The USD/JPY losses are tempered by demand from the Japan importers and the ultra-loose Bank of Japan's monetary policy and bullish USD sentiment (ICE spot dollar index hit 11.5-year high 98.808 Tuesday, last 98.67 versus 97.79 early Tuesday) as Friday's strong US February non-farm payrolls report raised expectations that the Fed will abandon the term "patient" from its interest rate statement next Wednesday and could raise interest rates from near zero as soon as June. The losses are also limited by a bigger-than-expected on-month increase of 0.3% in US January wholesale inventories (versus the forecast for no change).

Technical comment:
The daily chart is mixed as the MACD is bullish, 5 and 15-day moving averages are advancing, but stochastics is turning bearish at the overbought levels. Bearish doji shooting-star candlestick pattern was completed on Tuesday.

Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As long as the price is keeping above its pivot point, a long position is recommended with the first target at 122 and the second target at 122.50. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 120.60. A break of this target would push the pair further downwards, and one may expect the second target at 120.20. The pivot point is at 120.90.

Resistance levels:
122
122.50
122.75

Support levels:
120.60
120.20
120