Overview:

USD/JPY is expected to trade in a higher range. Spotlight is on Tuesday on 1400 GMT U.S. August ISM manufacturing PMI (forecast 56.8 versus July's 57.1). USD/JPY is underpinned by the positive dollar sentiment (ICE spot dollar index last 82.76 versus 82.73 early Monday) on recent upbeat U.S. economic data (U.S. August ISM Chicago PMI and University of Michigan consumer sentiment index data released on Friday beat forecasts), yen-funded carry trades amid the positive investor risk appetite (FTSE Eurofirst gained 0.22% Monday to close at 1,376.83; Shanghai Composite rose 0.83% Monday) as soft China August manufacturing PMI data raised hopes for more stimulus measures from Beijing. USD/JPY is also supported by the demand from Japanese importers and lower Markit/JMMA Japan final August manufacturing PMI of 52.2 versus preliminary reading of 52.4. But USD/JPY gains are tempered by Japanese export sales and lingering worries over the situation in Ukraine.

Technical comment:
The daily chart is positive-biased as MACD is bullish, stochastics stays elevated in the overbought zone, five and 15-day moving averages are advancing.

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 105.20 and the second target at 105.40. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 104.20. A break of this target would push the pair further downwards and one may expect the second target at 104. The pivot point is at 104.35.

Resistance levels:
105.20
105.40
105.60

Support levels:
104.20
104
103.75