[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]  JPY Remains Weak, But USD Cautious Ahead of Earnings January 23, 7:00 AM: EUR/$..0.8854 $/JPY..134.00 GBP/$..1.4280 $/CHF..1.6634  JPY Remains Weak, But USD Cautious Ahead of Earnings by Jes Black  At 8:40:00 AM US Redbook (exp 4.3%, prev 4.3%) Event: Greenspan speech at 10:00 AM  The dollar retested overnight 39-month highs at 134.48 today amid further comments from US Treasury Secretary O'Neill and Japanese officials. The most market moving remark came from Japanese Finance Minister Shiokawa who said he didn't think the yen was falling too rapidly. This pushed GBP/JPY to a new 30-month high of 192.20 and  EUR/JPY to a 3-week high of 119.15. But movements were contained by Japanese PM Koizumi who said a rapid fall in the yen was unwelcome.  Today's comments differed little from overnight remarks which sent the yen tumbling. Moreover, the market is most interested in the US administration's stance on a strong dollar and a tolerance for a weak yen. Therefore, today's remarks were not seen as stoking the "weak yen" fires. O'Neill has tried to play down the FX card by saying the US is only likely to support yen weakness if it means Japan forces banks to dump bad loans, accelerates structural reforms and deregulates the markets, like the US has done. O'Neill also pointed out on Wednesday the need for Japan to open up more markets to foreign competition and for monetary policy to respond to the deflationary crises. Shiokawa agreed with O'Neill's assessment.  Interestingly, EUR/JPY didn't get much of a boost from Wednesday's Financial Times, in which top financial diplomat Kuroda wrote the euro is "significantly undervalued," and that the introduction of euro notes and coins should lead to appreciation of the single currency. EUR/JPY rose to a 3-week high of 119.15 but failed to even test this month's 2-year high of 119.71. Support is seen at 118.65, 118.30 and 118.00.  Kuroda also said Japan, "needs to tackle structural reform in three areas: in the banking sector, particularly in the disposal of non-performing loans; in deregulation, to spur investment in new business; and in fiscal consolidation."    Moreover, he discounted recent concerns from Asian neighbors, saying, "...after the financial crises in the region in 1997-98, most Asian countries have adopted more flexible exchange rate policies and significantly strengthened their foreign reserve positions. Therefore it is highly unlikely that the yen's recent depreciation will have a significantly negative impact on other Asian economies. Neither is it likely to lead to speculative attacks on other Asian currencies."  GBP/JPY hit a new 30-month high of 192.20 on weak yen sentiment and Japanese fund demand for sterling. However, GBP has had difficulty maintaining above 192 twice this month and it again fell back to a day's low around 191.30. Resistance is seen at 191.50, 191.70 and 192.20. Follow up support is seen at 191.10 and 190.85.  The dollar also had difficulty holding onto gains and its inability to break overnight highs at 134.48 could mean some profit taking is in store for USD/JPY. However, the US administration's tacit approval for a weaker yen will keep pressure on JPY in the near term. Support is seen at 133.80, 133.50, 133.20 and 132.90.  EUR/USD held above 88.50 in European trade after falling from an overnight high of 88.90. Resistance is seen at 89.10-- the 50% Fibonacci retracement of the move from 82.25 to 95.96. Failure to regain 89.10 would likely send the pair lower again, testing support at 88.50, then 88.10, 87.70 and key support at 87.50-- the 31.8% Fibonacci retracement of the same move. But only if the pair can maintain above 88.50 and challenge 89.80 would it give any hope of a near term recovery as temporary moves higher are not seen by the market as indicating strength given the euro's difficulty to remain above 90-cents.  The euro also held onto gains against sterling after reaching a 2-week high of 62.13. Again, sterling came under pressure in the aftermath of EMU concerns following Monday night comments from Bank of England Director for Europe, John Townend, who said the pound was clearly overvalued against the euro and would almost certainly need to weaken if the UK were to join the EMU.   GBP/USD also remained under pressure and revisited overnight 1-week lows around 1.4270. Cable upside is seen capped at 1.4330 and 1.4350. Key support is now seen at 1.4270, the 61.8% retracement of the move from 1.4060 to 1.4606. A move below this level could open the pair up to larger losses as the pair targeted 1.4207 and ultimately last November's lows around 1.4060.  The Bank of England kept the door open for further rates cuts when it was revealed today in the minutes that the MPC voted 9-0 to keep rates unchanged at 4.0% in January meeting but also said there may be a case for a rate cut if consumption slows before the global economy recovers. They also said rates would have to rise if consumption fails to slow fast enough but that the risks are evenly balanced, even if the MPC believes consumption is unlikely to slow naturally.  Markets will also pay attention to Thursday's speech by Fed Chairman Greenspan before the Senate Budget Committee at 10:00 AM. Market sentiment now believes Greenspan probably sounded more pessimistic than he intended in his speech on January 11. Therefore, the market is anticipating a more upbeat tone tomorrow about prospects for economic recovery. Interest rate futures are pricing in a 22% chance of a rate cut at the Jan 30 meeting, 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.  Meanwhile, earnings news will remain the primary focus on Wall Street today, with chain store sales figures expected to hold at 4.3% in January.  Today's companies expected to report gains are Amgen, Boeing, DuPont, Dynegy, Exxon, Merrill Lynch, Pfizer. The major companies expected to report a loss are Broadcom, Coca-Cola Enterprises and Corning. The markets will have to assess over 500 company earnings reports this week, with 2/3 left to report. Wall Street is likely to pay more attention to the forward outlook after already pricing in dismal Q4 figures.     	[IMAGE] Audio Mkt. Analysis Dollar Retreats on O'Neill's Balanced Words        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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