USD/JPY is expected to trade with a bearish bias. With the U.S. dollar index currently trading at 96.962, the U.S. dollar held firm overnight thanks to solid U.S. housing data while U.S. stocks edged lower. The U.S. government reported that housing starts increased 0.2% on-month in July to a seasonally adjusted annual rate of 1.21 million, the highest level since October 2007. Meanwhile, the Dow Jones Industrial Average fell 0.2% to 17511.34, the S&P 500 lost 0.3% to 2096.92, and the Nasdaq Composite dropped 0.6% to 5059.35. Crude oil bounced 1.8% to $42.62 a barrel, gold slid 0.1% to $1,117.10 an ounce, while the 10-year Treasury yield climbed to 2.196% from 2.150% a day earlier. Regarding USD/JPY, the pair has narrowed its trading range to between the key resistance at 124.60 and the first downside target at 124.15. It is overlapping with the 20- and 50-period intraday moving averages. At the same time, the intraday RSI is around the neutrality level of 50 and lacking momentum. As long as the key resistance at 124.60 is not surpassed, expect choppy price action with a bearish bias. The second downside target is now set at 124.00 (the low of August 14).

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 124. A break of that target will move the pair further downwards to 123.75. 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: 124 123.75 123.50