USD/JPY clings to gains beyond 113.00 handle, near 2-1/2 month tops

The greenback continued gaining traction across the board, lifting the USD/JPY pair back to 2-1/2 month highs, in the 113.20-25 region. 

Optimism over the US President Donald Trump's tax reform plan and hawkish Fed outlook continued driving the greenback higher, which got an additional boost after data released on Monday showed that activity in the US manufacturing sector accelerated in September.

In fact, the key US Dollar Index struck a 1-1/2 month high on Tuesday, backed by the ongoing upsurge in the US Treasury bond yields, and remained supportive of the pair's uptick for the third consecutive session.

Meanwhile, the three major US equity indices closed at record highs on Monday and the spill-over effect drove Asian markets higher on Tuesday. The prevalent risk-on environment was also seen weighing on the Japanese Yen's safe-haven appeal and further collaborated to the pair's move on Tuesday. 

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In absence of any major market moving economic releases from the US, traders would take cues from the Fed Governor Jerome Powell's comments at an event in Washington DC, later during the NA session.

Technical levels to watch

A convincing move beyond 113.20-25 area is likely to accelerate the up-move towards the 113.50-55 region before the pair eventually aims towards reclaiming the 114.00 handle.

On the flip side, 112.80-70 area now seems to protect immediate downside, below which the pair could drop back towards 112.30 intermediate level en-route 200-day SMA support near the 112.00 handle.