London, May 29 (BridgeNews) - The following is a summary of overnight moves since Europe's close, plus possible leaders for the session ahead:

KEY ISSUES:

* After pre-holiday pause Euro takes another look at the downside
* Intervention fears start to rise

EUR/USD on the slide again as EUR/JPY weighs

Heavy selling of EUR/JPY was at the centre of market moves overnight as the pair were dragged down following heavy selling initially by European and Japanese names and then by US. EUR/USD and USD/JPY have also slipped on the back of the EUR/JPY moves, despite an earlier bout of JPY weakening after a spate of JPY-negative data releases.
--EUR/JPY reversed 3-day gains, dropping from a 4 day high of 104.48 to 103.35 during the late US and Asian session. Heading into Europe, the cross is down to 102.78 so far and looking vulnerable. Last Thursday's 101.04 will be a focus for some.
--USD/JPY had risen to 121.38 on the back of further signs that the economy was weakening, before EUR/JPT sales pushed it back to a low of 120.61 then 120.38 heading into Europe. Japan's Minister of Economy, Trade and Industry Hiranuma said Tuesday that Japan's industrial production data shows the economy is weakening. Output fell a seasonally adjusted 1.7% in April from March, the ministry announced earlier this morning. Hiranuma also said he had urged the BOJ to consider ways to help small corporations, but gave no details. Japanese average consumer spending was down 4.4% in real terms for April, the first such drop since Nov 2000. The market will keep an eye out for a US-Japan summit to be held in Camp David on June 30. Japan's economic and fiscal guidelines will be outlined, which historically sparks a period of JPY volatility. With this in mind, it was interesting that 1-year JPY vols slipped to a 2001 low overnight.
--EUR/USD was also pulled lower from 0.8613 to 0.8536. Traders had reported that the spectre of intervention had limited short selling of EUR/USD. However, comments from Duisenberg to Monday's session of the European Parliament seemed to lessen the likelihood of intervention. While he reiterated that intervention was a tool at the central bank's disposal, he said that the exchange rate was not a policy target. He added that the bank was not in the business of surprising the markets (note last rate cut timing...); inflationary pressures are to the downside; and, that the bank's monetary policy was appropriate and would be vindicated by future price stability. Also possibly weighing on the EUR were press reports that Alcatel was nearing the $32 bn acquisition of Lucent. Even though the proposed purchase will be made in stock, it could > precipitate heavy capital flows if the US shareholders decide to liquidate European stock.
--The USD's strength against the EUR is also propping it up against the CHF. The pair has climbed from 1.7743 to 1.7880. Cable has also slipped from 1.4217 to 1.4178.
--Some poor Australian data combined with EUR weakness brought AUD/USD down from 0.5212 to 0.5164. Australia posted a trade deficit for April of $9 million compared to a forecast $1 million surplus. Company profits fell a higher than expected 3.3% for Q1. BridgeNews