USD/JPY holds weaker below mid-113.00s, downside seems limited

   •  Retreats from 3-month tops on profit taking
   •  Prospects for a major US tax overhaul lending support

The USD/JPY pair extended previous session's retracement from 3-month tops and held with a mild negative bias on Tuesday. 

Fails to sustain above 114.00 mark

On Monday, the pair witnessed a bullish opening gap and jumped above the 114.00 handle in reaction to the Japanese PM Shinzo Abe's big win in Sunday's snap election. The gap was filled and the pair dropped to an intraday low level of 113.24 in wake of a modest pull-back in the US equity markets. 

This, along with sliding US Treasury bond yields prompted traders to take some profits off the table, especially after the pair's recent rally of over 225-pips. 

Meanwhile, anxiousness over the appointment of the next Fed Chair kept the US Dollar bulls on the back-foot and has been one of the key factors weighing on the major through Asian session on Tuesday. 

Downside seems limited

However, the prevalent positive trading sentiment around Asian equity markets did little to provide any additional boost to the Japanese Yen's safe-haven appeal. Adding to this, prospects for a major tax overhaul in the US might continue to underpin the greenback demand and help limit deeper losses.

Today's economic docket features the release of preliminary US Markit manufacturing PMI and would now be looked upon for some fresh short-term trading impetus. 

Technical levels to watch

Immediate support remains near 113.20 area, below which the corrective slide could get extended even below the 113.00 handle towards the next support near the 112.75-70 region.

On the upside, momentum above mid-113.00s is likely to confront fresh supply near 113.75-80 zone, which if cleared could assist the pair to make a fresh attempt towards conquering the 114.00 handle.