[IMAGE] Forums Discuss these points in the Forums:  Forexnews Forum       Technicals Live Charts Analysis available from: Cornelius Luca   J.P. Chorek   Technical Research Ltd.   Charts & News featuring Standard & Poor's       Interest Rates   US: Japan: Eurozone: UK: Switzerland:   2.0%  0.15%  3.25%  4.0%  1.75-2.75%       [IMAGE] 	 [IMAGE]  Dollar Regains Momentum as Confidence in US Outlook Rises  November 19, 7:00 AM: EUR/$..0.8793 $/JPY..123.38 GBP/$..1.4211 $/CHF..1.6660  Dollar Regains Momentum as Confidence in US Outlook Rises by Jes Black  At 8:30:00 AM US Oct Housing Permits (exp 1.510 mln, prev 1.524 mln) US Oct Housing Starts (exp 1.520 mln, prev 1.574 mln)  The dollar added to earlier gains and soared to fresh 3-month high of 123.49 yen and a 3-1/2 week high of $1.4213 against the pound in European trade as markets anticipated renewed enthusiasm for a V-shaped recovery in the US. After falling to profit taking on Friday, following the largest drop in US industrial production in 11 years to -1.1%, the dollar regained its momentum as investors showed they still prefer the future outlook for USD over other major currencies. The dollar index is now at highs last seen in August, at 116.89, which put the euro under pressure at a day's low of $0.8789.   EUR/USD peaked around 88.60 on Friday, but was unable to hold onto gains above 88.40, which led the pair back towards the 88-cent level on Monday. Last week, the euro flirted with 88 cents, but maintained above key resistance around 87.45. The Bundesbank November monthly report indicated as expected that Q3 growth was flat for the Eurozone's number one economy. Flat growth in Q2 also contributed to a year on year growth rate of around 0.25%, down from 0.6% in Q2, thus showing that Germany is very close to a technical recession. EUR/USD edged back below 88 cents, but did not trigger stop loss orders and held to a day's low of 87.89.  Traders anticipate Wednesday's release of Germany's Ifo business climate index (an estimate of German growth, which accounts for about one-third of the Eurozone) to recover slightly in November to 86 after plunging to 85 in October from 89.5. Markets also await Eurozone industrial production figures for September, which likely dropped since French and Italian outputs declined. Disappointing results will most likely spark renewed selling in the euro. Support is seen at the 88-cent figure, backed by 87.70 and 87.45. Resistance is seen at 89.0, 89.30 and 89.50.  USD/JPY rose to a new 3-1/2 week high of 123.49, following another grim assessment of the Japanese economy by the Bank of Japan in its November report. "Adjustments in economic activity are becoming severe, as the substantial decline in production is beginning to have an adverse effect on private consumption through decreases in employment and income," the BoJ said in the monthly report. This was the sixth straight month the Bank cited weakening private consumption and falling corporate profits at banks and the deterioration in the manufacturing sector will add weakness to domestic demand, it said.   Following another downgrade in Japan's economic outlook, it now appears that FY02 tax revenue will probably be revised down by Y2.8 trln from Y49.6 trln, according to the MoF. Therefore, sticking to PM Koizumi's important reform to limit JGB issuance to 30 trillion yen in FY02 will be difficult. In order to achieve this, further expenditure cuts will be needed, which will likely find strong opposition within Koizumi's own LDP party. Japanese FinMin Shiokawa maintained that the government would limit new issuance to Y30 trln, but more LDP lawmakers are now openly requesting further fiscal stimulus. Aggravating the situation is that tax projection for FY02 is most likely to be revised down further.  Adding pressure to the yen is the fact that the BoJ decided by majority vote to keep monetary policy unchanged last week. It had eased in August and again in September but has since been keeping a wait-and-see stance. Interest rates are still near zero and its liquidity supply in the money market exceeds its stated target of 6 trillion yen. Moreover, another possible move by the BoJ would be to purchase more foreign bonds, which would lead to a substantial fall in the yen.   Rumor of selling interest in USD/JPY by exporters around 123.20 capping gains. Technical resistance around 123.35 also limiting upside potential. Meanwhile, with little room for improvement in the Japanese economy until late next year, most market watchers see the yen heading for 125 now that it has successfully breached the 123 mark. Resistance is seen around 123.35/45. But USD/JPY support is expected to hold at 121.95/122.00 followed by 121.40/50, with any pullback towards the latter level seen as a buying opportunity, dealers said.  EUR/GBP rose to a fresh high of 62.05 but is expected to stay rangebound at around 61-62 pence after recovering from recent 10-week lows around 60 pence. When that cross is steady, GBP/USD shadows the movements in the more dominant EUR/USD. So far, cable has fallen to a new one-month low of 1.4210 as it continues to suffer further declines since last Wednesday's inflation report by the Bank of England signaled a shift in market sentiment. The market is now more aware of the weaknesses the UK faces due to the internal and external imbalances in the economy. BoE's King pointed out that those imbalances might lead to a weaker pound. Moreover, the Bank appears more concerned about future inflationary pressures given that interest rates are now at a 40-year low. Therefore, interest rates are likely to be left on hold just as the labor market is showing its first signs of weakness, which will weigh on the pound. Major support now stands at 1.4195 after GBP fell below key levels of 1.4250 and 1.4230.  Meanwhile, USD/CHF rose to a session high around 1.6673 after falling to a low of 1.6536 on Friday. Helping the dollar were comments from Swiss National Bank Chairman Jean-Pierre Roth who said the outlook for the U.S. economy is uncertain but could improve if the war in Afghanistan ended. "The uncertainty is currently unusually great. But there is a certain chance now that the developments could come out better than feared. If and when it is true that the war in Afghanistan is over, that could give some important psychological impetus," he said. "Switzerland is so dependent on world trade that of course we cannot escape from developments abroad," he said. Moreover, the SNB aimed to conduct monetary policy "so that our interest rates are as low as possible in order to provide relief for the economy, but so that at the same time, we do not endanger price stability," he added. Inflation in Switzerland is below one percent.  On Friday, Roth said in an interview with the Financial Times that the Swiss franc's role as a safe-haven currency is declining because of the emergence of the euro. Thus Roth felt more at ease that the Swiss franc is reverting to the status of a normal currency as it becomes "less important as a financial asset". The Swiss National Bank has been dismayed by the appreciation in the Swiss franc as investors sought shelter amidst recent political uncertainty, thereby prompting the central bank to cut rates. Roth asserted that "if we were to face large capital inflows we would have to respond through monetary policy and interest rates" because "it is an illusion to think that we have other instruments that we could use to curb inflows". Upside capped at 1.6680 and 1.670. Support holds at 1.6535, 1.650 and 1.6480.  Today's US data is expected to show a decline in housing starts as the slowdown in the general economy starts to outweigh the benefits of record low mortgage rates. However, USD strength continues to stem from the belief that the US-backed war in Afghanistan is going better than anticipated and this is translating into a fall in uncertainty and a rise in confidence. Accordingly, dealers anticipate further gains on Wall Street this week, which is adding to the dollar's buoyancy.   	[IMAGE] Audio Mkt. Analysis Further Losses for GBP, EUR Steadies       Articles & Ideas  OPEC: The beginning of a price war?   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