[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 Rises Across the Board on Fears Over Japan's Reforms  February 19, 7:00 AM: EUR/$..0.8684 $/JPY..133.84 GBP/$..1.4247 $/CHF..1.7014  USD Rises Across the Board on Fears Over Japan's Reforms by Jes Black  At 8:30:00 AM US Jan Building Permits (exp 1.6 mln, prev 1.654 mln) US Jan Housing Starts (exp 1.6 mln, prev 1.570 mln)  USD added to its gains on Tuesday first against the yen, then against the European majors as dealers punished the yen for doubts about Prime Minister Koizumi's ability to reform Japan. USD/JPY rose to a one-week high of 134.01 while EUR/USD briefly broke through chart support at 86.80 and fell to a near two-week low of 86.66. GBP/USD also broke support at 1.4260 and fell to a one-week low of 1.4228.  USD/JPY rose to a new one-week high of 134.01 as traders reacted to Japan's inability to tackle key reforms pledges. Markets grew weary with Japanese rhetoric on Tuesday after listening intently last week to a number of assurances to shore up the financial system and tackle deflation. The market was also disappointed by Japan's shying away on the injection of public funds into the troubled banking sector. This led to a sell off in Mizuho Holdings, the world's biggest bank by assets, which fell 7.36%. Earlier this month the banking sector encountered a sell off which drove the Nikkei to 18-year lows until the Japanese government announced it was ready to shore up the troubled sector.  But there is a reason for government apprehension. For instance, the more aggressively the government pursues the disposal of non-performing loans (NPL), the more it will increase unemployment and deflation, thus depressing the economy even further in the short run. Therefore Japan will talk tough but likely take a less aggressive approach towards large institutions by again throwing money at the problem. Instead of getting rid of all problem loans, which would bankrupt many debtors, a kinder approach - like the bailout of the Daiei retail chain - will likely prevail. Although this is presumably not what Koizumi means by tough reform, given his declining political capital, it is more likely he will opt to rescue some key companies to avoid an unwelcome surge in joblessness. The end result is a lose/lose situation for JPY, thus the sell off seen today.  However, USD/JPY gains were constrained by repatriation flows back to Japan ahead of the March 31 book closing. Precisely because of troubled banks and indebted companies are forced to shore up their books ahead of the fiscal year end. Afterwards, the yen is likely to come back under pressure as Japan begins to tackle deflation and prevent a financial crisis. But how they plan to do this remains unclear. USD/JPY support is seen at 133.70, 132.65 and 132.35. Resistance is seen at 134.00 and 135.00.  EUR/USD fell to a day's low of 86.66 after breaking the 86.80 level which marks the 50% retracement of the 85.63 to 88.03 move. Follow up support is seen at 86.50, which is the 61.8% retracement of the same move. A break of that level would likely send the euro back to February's 6-month low of 85.63. Meanwhile, failure to regain the key 87.40/50 mark will likely keep pressure on the pair after it rebounded from last week's lows but met with heavy resistance at 87.46.  The euro rebounded from a day's low of 86.66 following a positive reaction to E12 December industrial production which rose as expected by 0.8%. Although the year on year rate was still down 4.1%, the data appears to have marked a turnaround for the troubled manufacturing sector, which is bullish for the euro.   German think tank Ifo's Sinn also raised eyebrows when he said that the EU's prediction for Germany's deficit was too harsh. This indicated that Germany may not face censure by the EU later this year for breaking the 3% debt/GDP ratio set out by the Maastrict treaty.  GBP/USD slipped to a new one-week low of 1.4228 after breaking last week's low of 1.4250. On Monday, cable bounced up to an overnight high of 1.4330 but failed to break key resistance around1.4340/50, which marks the 61.8% retracement of the move from 1.4515-1.4040 and has so far provided tough resistance. Without a break of that level, the pair remains heavy, dealers say. A break of support at 1.4250 seen targeting support at previous resistance levels of 1.4235 and 1.4180.  Today's verbal intervention in the interest rate market by the Bank of England's George surprised markets but did not weigh on the pound. George sought to quell speculation that UK interest rates are set to rise sharply this year, as the futures market is pricing in a rise from 4% to 5%, which is quite aggressive considering the weak inflationary environment. By doing so the BoE is saying the futures market overreacted and that interest rates are not likely to rise substantially this year.   A rise in wholesale price figures from Germany also had little reaction in the market as inflationary pressures are benign.  Meanwhile, housing start data from the US today is unlikely to affect markets, which will continue to focus on earnings news and any further fallout from the Enron affair. Omnicom Group Inc., the world's third-largest advertising company, said on Tuesday its fourth-quarter earnings rose 15 percent, despite the advertising slump that has besieged the sector for the past year. S?futures trading down 7, Nasdaq futures trading down 18 points.   	[IMAGE] Audio Mkt. Analysis JPY, EUR rebound vs USD       Articles & Ideas  GBP: Old Lady Faces Old Problem   Euro Rally Running Out of Steam       Articles & Ideas Forex Glossary   Economic Indicators   Forex Guides   Link Library      [IMAGE] 	
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