Fundamental Outlook:

USD/JPY is expected to consolidate as markets await the Federal Reserve monetary policy decision at 18:00 GMT. Most market participants anticipate that the Fed might remove the word "patient" from its policy statement what would indicate that US interest rates could be raised around midyear. The US yield curve flattened Tuesday ahead of the FOMC decision with the 2-year yield rising to 0.673% from 0.653% late Monday and the 10-year yield falling to 2.052% from 2.098% late Monday. USD/JPY is undermined by the unwinding of JPY-funded carry trades amid diminished investor risk appetite (VIX fear gauge rose 0.32% to 15.66, S&P fell 0.33% overnight) on caution before the FOMC decision, a larger-than-expected decrease of 17.0% in US February housing starts (versus forecast -2.3%) and weak oil prices (Nymex crude hit six-year low $42.41/bbl Tuesday). USD/JPY is also weighed by the Japanese exports. The USD/JPY downside is limited by demand from Japan's importers and the ultra-loose Bank of Japan's monetary policy.

Technical comment:
The daily chart is still positive-biased as the MACD is bullish, stochastics stays elevated at overbought levels. Five- and 15-day moving averages are advancing.

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 120.90. A break of that target will move the pair further downwards to 120.20. The pivot point stands at 121.65. 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 upside. According to that scenario, a long position is recommended with the first target at 122 and the second target at 122.50.

Resistance levels:
122
122.50
122.75

Support levels:
120.90
120.60
120.20