USD/JPY pulls away from daily highs, falls below 114 ahead of Wall Street's opening bell

• NFIB Business Optimism Index falls short of market expectations.
• US Dollar Index consolidates recent gains, drops below 97.50.
• Improved sentiment helps the pair cling to daily gains.

After closing the previous day with modest losses, the USD/JPY gained traction on Tuesday and rose to a daily high of 114.15 before losing its bullish momentum. As investors are getting ready for Wall Street's opening bell, the pair is trading at 113.95, adding 0.1% on a daily basis.

The cautious optimism surrounding Brexit negotiations helped major European equity indexes recover yesterday's losses on Tuesday and didn't allow safe-havens to gather strength. As markets are pricing the expectation of Brexit backstop text getting finalised today, the Euro Stoxx 50 and the German DAX indexes are both up 0.6% on the day.

Additionally, the rising demand for European currencies is also weighing on the greenback to limit the pair's gains today. The US Dollar Index, which advanced to its highest level in more than a year at 97.70 on Monday, was last seen down 0.35% on the day at 97.30. The only data releases from the United States today showed that the small business sentiment deteriorated in October with the NFIB Business Optimism Index falling to 107.4 from 107.9 recorded in September. Later in the day, FOMC members Brainard and Daly will be delivering speeches.

Technical levels to consider

The initial for the pair aligns at 114.20 (Nov. 12 high) ahead of 114.55 (Oct. 3 high) and 115.00 (psychological level). On the downside, supports could be seen at 113.60 (daily low), 113.00 (psychological level/20-DMA/50-DMA) and 112.00 (100-DMA/psychological level).