[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:   1.75%  0.15%  3.25%  4.0%  1.25-2.25%        [IMAGE]   	 [IMAGE]  USD Flexes Muscle But Earnings and Data Dominate January 16, 7:00 AM: EUR/$..0.8814 $/JPY..131.37 GBP/$..1.4355 $/CHF..1.6681  USD Flexes Muscle But Earnings and Data Dominate by Jes Black  At 8:30:00 AM US Dec CPI m/m (exp 0%, prev 0.%) US Dec CPI y/y (exp 1.6%, prev 1.9%) US Dec CPI m/m ex food/energy (exp 0.2%, prev 0.4%) US Dec Real Earnings (exp n/f, prev 0.8%) At 9:15:00 AM US Dec Capacity Util (exp 74.6%, prev 74.7%) US Dec Ind prod (exp 0.0%, prev -0.3%) At 9:30:00 AM US Nov Business Inv. (exp -0.5%, prev -1.4%) At 2:00:00 PM US Fed Beige Book (exp n/f, prev n/a)  The dollar added to gains in European trade as the euro fell to fresh lows against the dollar, yen and pound. Weighing on the single currency was sharp losses in the euro/yen to a fresh 3-week low of 115.67 since hitting a 2-year high of 119.71 on January 2. This spilled over into EUR/USD losses as key stops were triggered on its way to a fresh 3-week low of 88.04. The single currency was also down against the Swiss franc after dropping sharply in after-hours US trade on Tuesday, giving way to speculation the euro fell victim to Spanish banking losses in Argentina.  Despite dollar gains and euro losses, markets will remained focused on today's data and earnings announcement for further direction. Tuesday marked the start of earnings season and even though most companies beat poor Q4 expectations, the markets responded more to the general outlook and pushed shares up only slightly. Therefore, data will dictate as well this week. Economists forecast more improvements, and therefore, the dollar is likely to find support as long as the data meets or exceeds expectations.  Today's data includes business inventories, industrial production figures, the Beige book and CPI. Business inventories are expected to continue to decline in November, adding to the inventory correction which will be positive for the economy and the market. Industrial production is expected to be flat in December after the improvement in manufacturing PMI. This comes after four consecutive declines. The CPI report for December is expected to show that inflation trends are still tame, with a rise of 0.1% m/m. Markets will also look to the Fed's Beige book for their assessment of the current climate.  The key earnings announcements for today include General Motors at 8:00 AM, followed by Continental Airlines. It will also be a big day for tech stocks with Yahoo!, Advanced Micro Devices, Apple Computer, Compaq Computer, and Macromedia all reporting after the bell.  EUR/USD fell to a fresh 20-day low of 88.04 after falling below the key 89.10 level, which marks the 50% Fibonacci retracement of the move from 82.25 to 95.96. This level is significant in that it reflects equilibrium in supply and demand conditions between euro and dollar, indicating investors are unsure as to the future direction the pair will take. Moves higher are not seen by the market as indicating strength given the euro's difficulty to remain above 90-cents.   Moreover, yesterday's close below 88.60 is a bearish sign for the euro and an inability to regain that level will likely call upon further losses. But moves in the JPY will be important to watch as most of EUR/USD losses come on the back of a steep fall in EUR/JPY to a low of 115.67 from a high of 119.37 last week, or a 3% drop. That's double the losses incurred by USD/JPY. In the meantime, EUR/USD would have to break back above 89.50 for any hope of a near term recovery.  GBP/USD fell to a fresh one-week low of 1.4357, down from Monday's 2-week high of 1.4513 as losses vs JPY and losses in EUR/USD weighed on sterling as well. However, GBP was supported by weekend comments from PM Blair concerning EMU entry. Blair's comments have allowed GBP to keep EUR under pressure around 61.23 pence after falling as far as 62.80 at the start of the year. However, failure for GBP to maintain above 1.4440 will bode poorly for cable. Support is seen at 1.4360 and 1.4340 and 1.4320. Resistance is seen at 1.4390, 1.4440, 1.4480, 1.450 and 1.4550.  Meanwhile, JPY was little changed after the Bank of Japan Policy Board kept monetary policy unchanged with a current account deposit target at 10-15 trln yen. However, the central bank also decided to expand the range of eligible collateral for its money market operations as a new way of supplying funds to the money market. The BoJ was not expected to do something unorthodox which would give the impression that they were deliberately weakening the yen. Therefore, the buying foreign assets may not be an option if the market continues to push JPY lower.  USD/JPY rose to a day's high of 131.65, up from overnight lows around 130.80 after that support level held. Corrective yen buying was anticipated given the highly oversold position of the yen in recent weeks as it fell 10 points in 6 weeks to a 3-year low of 133.37 against the dollar. Any correction in USD/JPY will have to hold above 130.40 to maintain its bullish trend, dealers say.  EUR/JPY was not as lucky, only rising to a day's high of 116.24 before paring gains to a new 3-week low of 115.67. EUR/JPY losses were more pronounced as it broke out of its steep 2-month up trend from around 106 to a 2-year high of 119.71 on January 2. Since the euro's climb was steeper than that of the dollar against the yen, it was more vulnerable to a deeper retracement than USD/JPY. That was the case after EUR/JPY broke below support at 116.50. Resistance is now seen at 116.50 followed by 117.00 and key resistance at 117.50. A close above 116.50 will be needed in order to maintain its bullish momentum, dealers say. Key support is seen at 115.60.  Helping JPY was a declaration from Finance Minister Shiokawa that Japan was not intentionally guiding the yen lower and that that regional concerns about the weaker yen were a misunderstanding. But the impact was muted, as Japan's government maintained its bleak view on the economy the December monthly report, citing record-high unemployment and increasingly frequent bankruptcies. JPY was also weighed by Japan's Econ Min Takenaka who said the movements in FX markets have not been extreme.  In other news, Argentina's central bank intervened in the floating peso market overnight to prop up the currency when it weakened to near 2.0 pesos/dollar.     	[IMAGE] Audio Mkt. Analysis European FX Make Late Slide        Articles & Ideas  Greenspan Widens Door for One More, But...   A Weak Yen Is the Solution for Now        Articles & Ideas Forex Glossary   Economic Indicators   Forex Guides   Link Library      [IMAGE]  	
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