USD/JPY loses momentum, consolidates daily gains below 113

• Greenback inches higher above 93 as investors assess the tax bill.
• US Stocks trade mixed for the second straight day.
• USD/JPY loses traction ahead of the 113 mark.

After easing to a daily low at 112.40 ahead of the NA session start, the USD/JPY pair turned north and rose towards the 113 mark on the back of greenback strength. However, the pair failed to preserve its bullish momentum and went into a consolidation phase. As of writing, the pair was trading at 112.72, adding 0.28% on the day.

USD gains traction despite dismal data

Today's data from the United States showed that the international trade deficit increased to its highest level in nine months at $48.7 billion amid rising oil imports. Other data revealed that the business activity in the service sector in the United States expanded at a slower rate than markets anticipated. However, as Republicans move closer to getting their proposed tax bill legalized, investors are focusing on its potential positive impact on the economy, which is likely to force the Fed to tighten at a faster rate in 2018. The US Dollar Index renewed its highest level at 93.45 since last Thursday and was last seen at 93.36, where it was up 0.33% on the day.

On the other hand, major equity indexes in the United States are trading mixed for the second straight session as investors are trying to assess the potential effects of the tax reform on different sectors. The Nasdaq Composite Index, which dropped more than 1% on Monday, is up 0.3% while the Dow Jones Industrial Average, yesterday's big winner, is down 0.15%.

The economic docket in Japan won't be offering any data on Wednesday. Later in the day, the ADP employment report from the U.S., which is expected to show a 185K growth in the private sector employment, will be followed closely by the participants. 

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet, writes, "technically, the 4 hours chart shows that the pair is trapped between its 100 and 200 SMAs, with the larger one capping the upside around 113.10, while technical indicators turned lower, with the Momentum within neutral territory and the RSI currently at 56. Little clues are seen at this level, with gains beyond 113.10, or below 112.00 required to see a directional extension during the upcoming sessions."

According to the analyst, supports could be seen at 112.60, 112.10, and 111.75 while resistances align at 113.10, 113.45, and 113.80.