[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 Surges Before Greenspan Heads to the Hill January 24, 7:00 AM: EUR/$..0.8756 $/JPY..134.40 GBP/$..1.42299 $/CHF..1.6762  USD Surges Before Greenspan Heads to the Hill by Jes Black  At 8:30:00 AM US Jobless Claims (exp 385k, prev 384k) Event: At 10:00 AM Greenspan speech  The dollar broke through overnight highs against the European majors and climbed to a new 39-month high of 134.77 yen ahead of a much-anticipated speech by Fed Chairman Greenspan today at 10:00 AM. The speech before the Senate Budget Committee is expected to be more upbeat than his last, but dealers are likely to hold back on further dollar bidding as they pay heed to Greenspan's words.   Gains in USD/JPY outpaced the crosses, which actually fell to 3-day lows. EUR/JPY fell to a low of 117.60 from an overnight high above 119.00. GBP/JPY also fell to a low of 191.05 after hitting an overnight 30-month high of 192.20 on weak yen sentiment. This divergence is one of the catalysts to the dollar's strong gains against EuroFX today.  EUR/USD fell to a 1-month low of 87.59, dangerously close to key channel support at 87.50 which marks the 31.8% Fibonacci retracement of the move from 82.25 to 95.96. A break below that level would likely call upon further steep losses as the single currency has consistently failed to maintain above 90-cents. Temporary moves higher are not seen by the market as indicating strength, and are regarded as selling opportunities, dealers say.  The euro is likely to remain under pressure in the near term after sliding across the board on Wednesday following European Central Bank president Duisenberg's assertion that interest rates are on hold for the time being and that Germany's rising budget deficit was a further concern. By straightjacketing Germany, the ECB has nearly assured that the economy's engine of growth will continue to lag behind the rest of the Eurozone.  A more positive response is expected from Greenspan today after markets concluded that the Fed Chairman probably sounded more pessimistic about the economy than he intended in his speech on January 11. Moreover, given the recent squabble between Democrats and Republicans over who wasted the surpluses, Greenspan is also is likely to be questioned on his support for last year's tax cuts which Democrats claim are responsible for the elimination of budget surpluses and subsequent return to deficits.  The US budget surplus was once projected to total more than $5 trillion over the next 10 years, but recent estimates by the Senate Budget Committee show that the recession is likely to cost $1.366 billion on top of the $1.683 bln that will go to present and future tax cuts. Senate majority leader Daschle is likely to argue for a suspension of future tax cuts. But, Greenspan may reiterate his support for tax cuts to hasten and ensure a rebound, especially since it would spur consumer spending and stem the reduction in business investment. He will also likely say that the budget became a deficit due to the recession, and the resultant war following the September 11 attacks.   Nevertheless, the recent budget deficits projected by the CBO on Wednesday sent the bond market reeling as interest rates on 10-year Treasuries jumped to almost 5% from 4.91%, as the deficit figures were higher than some analysts predicted. This could also be a point of contention among Democrats who know Greenspan to endorse lower long term interest rates over deficit spending.  Meanwhile, markets will also listen to Greenspan's assessment of the economy to gauge whether there is a chance of a rate cut at the Jan 30 meeting. Interest rate futures are pricing in only a 22% chance, leaving the majority to believe rates will hold steady at 1.75%, a 40-year low. However, since the dollar index is trading near 6-month highs, most dealers are now divided over whether a further rate cut would help the dollar.  Following Greenspan, the market is likely to react to earnings announcements and the economic outlook from companies such as Eli Lilly, Eastman Kodak, Gateway, JDS Uniphase, McDonald s, Nokia, Phillips Petroleum, PMC-Sierra, Qualcomm and R.J. Reynolds Tobacco Holdings, who are reporting today. But it is Greenspan's assessment of the economy that is likely to direct Wall Street and the dollar.  While most believe the recession will be over this year, the key concern now is that economists and investors are again uncertain as to how strong growth will be when it resumes. The first question is whether investment spending will recover substantially now that inventory liquidation has run its course? The second question is whether consumer final demand will be strong enough in 2002 to warrant new business spending?   The risk is that consumers will be slow to take on additional debt, given their current debt loads, and this will cause the recovery to take another fall   called a double dip - until there is a more profound correction from past over investment. This can be seen in recent Wall Street losses as investors question the likelihood of future earnings growth this year.  GBP/USD broke below key support at 1.4220 and plunged to a day's low of 1.4202 after the UK's BCC said service firms export sales and orders reached rock bottom with the export balance at -7 vs +1 in Q3. BCC says circumstances continue to be dire and sterling's technical position vs the dollar looks likely to come under further strain if it cannot maintain above 1.4220, which marks the 61.8% Fibonacci retracement of the move from the January 8, 2001 high of 1.5101 to the June 12, 2001 low of 1.3680. Next support is seen at 1.420 and 1.4160. Upside capped at 1.430, 1.4360 and 1.440.  USD/CHF also regained its bullish momentum after a 7 franc surge in late December retraced back to 1.6350 earlier this month. Swissy rose to a 3-week high of 1.6778 after surging back through resistance at 1.6725. Support is seen at 1.6725 followed by 1.6660/80.     	[IMAGE] Audio Mkt. Analysis Dollar Hammers All Major Currencies        Articles & Ideas  NAM & the Strong Dollar: Phase II   Philly Fed-Supported Optimism       Articles & Ideas Forex Glossary   Economic Indicators   Forex Guides   Link Library      [IMAGE]  	
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