* EUR/USD initially rallied after the Ifo index of west German business sentiment for April came in at 92.5. While below the BridgeNews survey forecast of 93.0, it was better than some feared. But EUR/USD quickly fell back as traders put the Ifo survey alongside other bad news from the euro zone, such as a 0.8% monthly fall in French April household spending and a provisional 3.0% rise in Italian May city CPI, and contrasted this with growing signs that the U.S. economy might be turning a corner.

EUR/USD dropped to a 6-month low of 0.8663, after drilling below the previous low for the year at 0.8695.
Germany's Brandeburg May CPI up 4.1% on year. This is the first of the 6 German states to release preliminary CPI data for May, and the fact it carries such a small weighting in the national release makes it difficult to draw any meaningful conclusions. According to a Bridge Fokus Deutschland survey, pan-German CPI is expected to rise 0.3% on the month and 3.2% on the year in May, compared with increases of 0.3% and 2.8% respectively in April. Such figures may make it more difficult for the ECB to respond to further signs of economic weakness in the euro zone. The outlook is bearish.

Support: 0.8663 (overnight low; 6-month low), 0.8427 (support line declining since Jan. 25), 0.8372 (Nov. 23 low).
Resistance: 0.8776 (overnight high), 0.8790 (38.2% Fibonacci retracement level of the June-October downtrend), 0.8848 (61.8% Fibonacci retracement level of the Nov. 27-Jan. 5 uptrend), 0.8857 (20-day moving average), 0.8927 (200-day moving average).

* USD/JPY mirrored EUR/USD's losses, by climbing to a high of 123.35. The pair continues to draw excellent support from the 122.50 Gann 50-point pivot, which targets 122.00 and 123.00.
Overnight, BOJ Governor Masaru Hayami said that he does not see the need for the BOJ to increase the outright buying of long-term government bonds, known as "rinban" operations. Hayami said that the BOJ recently failed to inject sufficient funds into the money market on the back of weak fund demand by financial institutions.
Japanese economic data was mixed.
The index of leading indicators was revised down to 20.0 in March from a preliminary figure of 25.0, the Cabinet Office's Economic and Social Research Institute said.
Japan's service industry index rose 0.8% on the month in March, on a seasonally adjusted basis, after rising 2.0% in February, the Ministry of Economy, Trade and Industry said. Services account for 60% of Japan's economy.
METI also said the all-industries index, which is closely linked to GDP, rose 0.4% in March, and also rose 0.4% in the first quarter. The outlook is mixed within Friday's range.

Support: 122.55 (20-day moving average), 122.54 (overnight low), 122.50 (Gann 50-point pivot; targets: 122.00/123.00), 122.41 (60-day moving average), 121.05 (Gann 50-point pivot; targets: 120.55/121.55), 120.53 (May 4 low).
Resistance: 123.35 (overnight high), 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 124.05 (May 16 peak), 124.35 (April 27 peak), 125.50 (Gann 50-point pivot; targets: 125.00/126.00), 126.84 (April 2 high; 29-month high).

* EUR/JPY hit a 3-month low of 106.62 as EUR/USD remains under selling pressure. There is little support ahead of 105.80, 38.2% Fibonacci retracement level of the May 1999-October 2000 downtrend.
The outlook is bearish.

Support: 106.62 (overnight low; 3-month low), 105.80 (38.2% Fibonacci retracement level of May 1999-October 2000 downtrend), 104.15 (Feb. 16 trough; year's low).
Resistance: 107.90 (overnight high), 108.53 (20-day moving average), 109.21 (100-day moving average), 109.76 (60-day moving average), 111.02 (50% Fibonacci retracement level of May 1999-October 2000 downtrend).

* GBP/USD's decline was signaled Monday by a bearish doji reversal signal on the candlestick chart. The pair was dragged down by profit taking form Monday's peak of 1.4414, which was encouraged by the flaky euro. The outlook is bearish.

Support: 1.4284 (overnight low), 1.4143 (May 11 low; 4 1/2-month low), 1.3966 (Nov. 24 trough).
Resistance: 1.4315 (20-day moving average), 1.4371 (60-day moving average), 1.4402 (61.8% Fibonacci retracement level of Nov.-Jan. uptrend), 1.4404 (overnight high), 1.4534 (50% Fibonacci retracement level of the Nov.-Jan.rally), 1.4481 (100-day moving average).