The USD/JPY is making another move to break out of February highs on Wednesday as the Tankan Manufacturing Index came in below analyst expectations.  However, we have not seen as severe of a reaction to the upside as we expected.  Perhaps investors are tempered by the news the U.S. government will likely opt for the bankruptcy of GM and Chrysler.  Regardless, the deterioration of the Japanese economy is outpacing even reduced analyst expectations while U.S. economic data has shown signs of stabilization.  Therefore, with the Carry Trade unwound, the U.S. is clearly winning the battle between the two economies. 

Hence, a retest of 100 seems all but inevitable.  However, the currency pair still hasn’t broken out of the difficult February highs.  Until it does, the USD/JPY will remain mired in its consolidation.  On the other hand, if and when the USD/JPY climbs out of the trading range, we expect to see a return to high volatility for the near-term. 

Meanwhile, investors will keep an eye on monetary policy discussions taking place at the G20 while the U.S. releases ADP Non-Farm Employment Change, SIM Manufacturing PMI, and Pending Home Sales.  Fundamentally, we maintain our resistances of 99.06, 99.79, 100.28, 100.71, and 101.44.  To the downside, we hold our supports of 98.16, 97.66, 96.65, and 95.98.  The USD/JPY is currently exchanging at 98.91.

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