USD/JPY is expected to consolidate with bearish bias after hitting almost the two-month low of 120.38 on Wednesday. It is undermined by the flows to the safe-haven yen and unwinding of the yen-funded carry trades amid increased risk aversion (VIX fear gauge surged 22.19% to 19.66, S&P 500 closed 1.67% lower at 2,046.68 overnight) as a deepening rout in China's stock markets heightened anxiety over the potential knock-on effect on the global growth outlook. USD/JPY is also weighed by the lower US Treasury yields (10-year slipped 3.3 bps to 2.197% Wednesday) and weaker dollar sentiment (ICE spot dollar index last 96.22 versus 96.68 early Wednesday) after the release of the June FOMC meeting minutes signaled continued caution in shifting into higher interest rates and less-than-expected $16.09 billion increase in the US May consumer credit (versus forecast +$19.0 billion). But USD/JPY losses are tempered by 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 and 15-day moving averages are 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 121. A break of that target will move the pair further downwards to 120.65. The pivot point stands at 121.70. 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 mo ve further to the upside. According to that scenario, long positions are recommended with the first target at 122.15 and the second target at 122.60.

Resistance levels: 122.15 122.60 122.90

Support levels: 121 120.65 120