USD/JPY is expected to trade in a lower range. The US dollar index is currently trading at 96.369 as the US dollar reversed course overnight dropping against major currencies. China's surprise move to devaluate the yuan caused traders to doubt if the US Federal Reserve would hike interest rates in September as expected. The euro touched the monthly high of $1.1215, USD/CAD posted the biggest daily loss since mid-April to close at 1.2973 to the US dollar, and USD/CHF plunged 1.31% to close at 0.9748. Meanwhile USD/JPY is posting a technical rebound from yesterday's low of 123.85 but remains below the key resistance at 124.60. The 20-period intraday moving average is still under the 50-period one. As long as the pair fails to surpass 124.70, it stands a higher chance of returning to the first downside target at 123.80 and to the second one at 123.50 in extension.

Technical comment:

The daily chart is negative-biased as stochastics is bearish. The MACD histogram bars are turned negative.

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 123.85. A break of that target will move the pair further downwards to 123.50. The pivot point stands at 124.60. 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 125 and the second target at 125.25.

Resistance levels: 125 125.25 125.60

Support levels: 123.85 123.50 123.20