USD/JPY sticks to daily gains as US T-bond yields support the greenback

• US 10-year T-bond yield up 1% on the day.
• Stocks trade mixed on tax reform expectations.
• US Dollar Index looks to close the day above 93.

After starting the week with a 60-pip bullish gap, the USD/JPY pair extended its gains to touch its highest level since November 16 at 113.09 on Monday before losing its momentum in the NA session. Nevertheless, the pair is still up 0.5% on the day as it's trading at 112.75 at the moment.

Greenback starts the week on a positive note

The Senate in the United States approved Republicans' tax bill on early Saturday morning, allowing the US Dollar Index to show a positive reaction on Monday. Furthermore, the market sentiment improved as Michael Flynn's, Donald Trump's former national security adviser, testimony didn't provide any additional headlines that could push investors to safer assets. In fact, the US Treasury-bond yields pushed higher on Monday, reflecting the risk-on mood. As of writing, the 10-year T-bond yield was up nearly 1% on the day, helping the DXY preserve its daily gains above the 93 mark. 

In the meantime, major equity indexes in the United States are showing mixed reactions to the tax bill news on Monday. Fueled by the robust gains witnessed in financials, the Dow Jones Industrial Average and the broader S&P 500 indexes are rising on Monday while the tech-heavy Nasdaq Composite remains in the red. "We're seeing some rotation away from technology stocks, which is likely due for a breather, into financial stocks and we expect to see that continue," Emily Roland, head of investment research at John Hancock Investments in Boston, told Reuters on Monday.

With a fairly quiet economic calendar in the Asian session on Tuesday, the pair is likely to remain in a consolidation phase. Later in the day on Tuesday, Markit is going to release its PMI data for the service sector in the United States, which is expected to improve to 55.4 in November showing accelerated expansion in business activity.

Technical levels to consider

The pair could encounter the first technical resistance at 112.90 (50-DMA) ahead of 113.35 (Nov. 16 high) and 113.90 (Nov. 14 high). On the downside, supports align at 112.30 (20-DMA), 111.60 (200-DMA) and 111 (psychological level). The RSI indicator on the daily graph is moving sideways near the 50 mark, supporting the view of a short-term neutral outlook for the pair.