USD/JPY is expected to trade with risks skewed lower. It is undermined by the weaker dollar sentiment (ICE spot dollar index last 94.83 versus 95.15 early Monday) after unexpected 0.2% on-month drop in the US May industrial production (versus forecast +0.2%), lower-than-expected May capacity utilization of 78.1% (versus forecast 78.3%), surprise drop in the US Empire State's business conditions index to -1.98 in June from 3.09 in May (versus forecast for rise to 5.4). USD/JPY is also weighed by the lower US Treasury yields (10-year slipped 2.6 bps to 2.359% Monday), Japan's exports, and flows to the safe-haven yen amid increased risk aversion (VIX fear gauge rose 11.68% to 15.39, S&P 500 closed 0.46% lower at 2,084.43 overnight) on concerns about Greece's financial future and positions adjustment as caution prevails ahead of the FOMC monetary decision due on Wednesday. But USD sentiment is soothed by the stronger-than-expected US June NAHB housing market index of 59 (versus forecast 56). USD/JPY losses are also tempered by the demand from the Japanese importers and the Bank of Japan's ultra-loose monetary policy.

Technical comment:

The daily chart is negative-biased as the MACD and stochastics are bearish. Five-day moving average is below 15-day moving average and is declining.

Trading recommendations:

The pair is trading below its pivot point. It is likely to trade in a lower range as long as it remains below the pivot point. Short positions are recommended with the first target at 122.90. A break of that target will move the pair further downwards to 122.45. The pivot point stands at 124.10. 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, long positions are recommended with the first target at 124.65 and the second target at 124.95.

Resistance levels: 124.65 124.95 125.35

Support levels: 122.90 122.45 122