* Profit taking continued to erode USD/JPY's gains, which crested Friday at a two-month high of 124.74. Thus far, the psychological barrier at 125.00 remains intact.
The Japanese government has approved a sweeping economic and fiscal reform plan designed to bring the country's comatose economy back to life. (Story .13034) The cabinet of Prime Minister Koizumi endorsed the reform plan, which was originally announced last Thursday.
Key proposals in the plan include cleaning up massive bad loans in the Japanese banking sector and urging the government to review the allocation of public funds and public works projects. It warns of tough economic times in the next two to three years as Japan goes through "an intensive adjustment period" in carrying out reforms in a bid to secure long-term robust economic growth.
Under the plan, the government will cap government bonds issuance at 30 trillion JPY for the year to March 2003.
The outlook is for choppy trade just below the 124.00 level.

Support: 123.28 (overnight low), 122.50 (Gann 50-point pivot; targets: 122.00/123.00), 122.31 (60-day moving average), 121.05 (Gann 50-point pivot; targets: 120.55/121.55), 121.78 (20-day moving average), 119.65 (Gann 50-point 8 pivot; targets: 119.15/120.15), 119.00 (38.2% Fibonacci retracement level of the August 1998-December 1999 downtrend), 118.30 (June 1 trough; 3-month low), 118.25 (Gann 50-point pivot; targets: 117.75/118.75).
Resistance: 123.93 (overnight high), 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 125.50 (Gann 50-point pivot; targets: 125.00/126.00), 126.84 (April 2 high; 29-month high).

* Trend-following fund money continues to flow into the euro as technical charts are painting a bottom and moving averages are finally turning higher.
The influential German Ifo institute has said it has cut its economic growth forecasts for Germany and the euro zone, and raised its inflation forecasts. German GDP growth is seen reaching just 1.2% this year, compared with 2.1% forecast in April, while euro-zone GDP is seen growing 1.9%, compared with the previous 2.6%. Ifo said it expected the ECB to cut interest rates slightly one more time this year.
"The German economy at the moment has not yet reached the low point," Ifo said in its latest economic forecasts. Germany and the euro zone should experience a moderate acceleration of economic activity in the second half of this year.
The outlook is for the euro to continue its recent rise but commercial risk-managing hedgers will sell in the 86.60 to 86.70 area.

Support: 0.8587 (overnight low), 0.85x (20-day moving average), 0.8411 (June 11 low; 6-month low), 0.8372 (Nov. 23 low), 0.8245 (1.382% Fibonacci extension level the Jan. 6-May 4, 19 downtrend; target of fifth Elliott wave), 0.8228 (Oct. 26 low; lifetime low).
Resistance: 0.8650 (overnight high), 0.8673 (June 15 peak), 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).
* EUR/JPY continued to test the area below 107.00 as the euro continues to firm against the yen.
The outlook is slightly bullish within a channel rising since June 1. The outlook is for the euro to attack the psychological 107.00 point.

Support: 106.25 (overnight low), 99.85 (June 1 low; 5 1/2-month low), 97.22 (Dec. 12 trough).
Resistance: 106.52 (overnight high), 105.80 (38.2% Fibonacci retracement level of May 1999-October 2000 downtrend).

The GBP strengthened only temporarily in the wake of data that showed U.K. first quarter GDP was unexpectedly revised up to 0.5% q/q from a provisional 0.4% q/q at the final estimate. The current account deficit also came in much narrower than forecast in the first quarter, at an 0.18-bln-GBP deficit, down from a 3.696-billion-GBP deficit in the fourth quarter.
EUR/GBP has dipped off a 5-day high around 0.6125 to the 0.6110 area, while cable has popped up to an intraday high around 1.4140. The front-month short sterling contact dipped 3 ticks following the data and is at 94.65, unchanged on the day. The front-month long gilt contract has dipped from 113.42 to 113.36, 22 ticks lower on the day.
The outlook is mixed as the sterling has stalled below the 141.50 to 141.70 area.

Support: 1.4106 (overnight low), 1.3688 (June 12 low; 15 1/2-year low), 1.3660 (February 1986 trough).
Resistance: 1.4147 (overnight high), 1.4028 (20-day moving average), 1.4219 (60-day moving average).