Overview:

USD/JPY is expected to consolidate with a bullish bias after hitting a nine-month high at 105.22 on Tuesday. It is underpinned by the positive dollar sentiment (ICE spot dollar index last 82.97 versus 82.76 early Tuesday) and higher U.S. Treasury yields (10-year at 2.423% versus 2.345% late Friday) after a surprise rise in U.S. ISM manufacturing PMI to 59.0 in August--its highest since March 2011--from 57.1 in July (defying forecast for a drop to 56.8), stronger-than-expected 1.8% increase in U.S. July construction spending (versus forecast +1.2%), as well as a rise in U.S. IBD/TIPP Economic Optimism Index to 45.2 in September after 44.5 in August. USD/JPY is also supported by the demand from Japanese importers and the weak JPY sentiment anticipation of increased offshore asset allocation by Japan's Government Pension Investment Fund. 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 and stochastics are bullish, although latter is 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 105.40 and the second target at 105.60. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 104.55. A break of this target would push the pair further downwards and one may expect the second target at 104.35. The pivot point is at 104.70.

Resistance levels:
105.40
105.60
105.80

Support levels:
104.55
104.35
104.20