The USD/JPY continues its hard-fought battle with February highs and our 3rd tier downtrend line, but the currency pair seems to be losing the battle.  The rally is losing its momentum and may have one last shot at breaking through and retesting 100.

The fact investors lack conviction and commitment to a depreciating Yen reflects uncertainty concerning the state of the Japanese economy.  Japan’s Prelim Industrial Production data came in below analyst expectations with the highly-anticipated Tankan Manufacturing Index coming late Tuesday EST. 

With the Carry Trade unraveled, investors are pricing the USD/JPY based on comparative economic fundamentals.  Considering both Japan and America are faring poorly to say the least, the USD/JPY is mired in an extensive consolidation period.

Regardless, the downtrend is sitting in the driver’s seat for now.  If the USD/JPY fails to make a commitment to the upside soon, then we could see the currency pair giving way to its tendency to move lower.

Japan will release some more economic data before the Tankan Survey, including Household Spending and Average Cash Earnings.

However, the Tankan could be a pivot point for the USD/JPY.  Should the data come in much worse than expected, we could witness a sharp movement to the downside.

Fundamentally, we maintain see resistances of 97.66, 98.16, 99.06, and 99.79.  To the downside, we find supports of 96.65, 95.98, 95.53, 94.97, and 94.24.  The USD/JPY is currently exchanging at 96.87.

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