Cornelius Luca // New York, July 30 (BridgeNews) - The Japanese currency fell to a 12-day low of 125.16 yen to the dollar following the decisive victory of the ruling Liberal Democratic Party in the upper house elections. While he received a clear mandate for much-needed structural reforms, Prime Minister Junichiro Koizumi feared the changes will hurt the local economy over the next two to three years. The dollar posted gains versus all other major currencies except for the pound sterling.

Euro/dollar slipped within Friday's range, dollar/Swiss franc advanced to a 6-day high of 1.7318, sterling/dollar rebounded from a five-day low of 1.4213, while dollar/Canada rose within the previous day's range.
With no events scheduled for release, the activity may remain dull Monday as traders ponder the odds of actually implementing the much-heralded changes in Japan in the face of inter-LDP conservative opposition. The dollar should retain its upper hand at least on the day.

Current Previous Change Global Global
NY open NY close low high

USD/JPY 125.08 123.51 1.57 123.23 125.19
EUR/USD 0.8750 0.8776 -0.0026 0.8723 0.8774
EUR/JPY 109.44 108.43 1.01 108.02 109.53
GBP/USD 1.4255 1.4238 0.0017 1.4213 1.4264
USD/CHF 1.7275 1.7208 0.0067 1.7187 1.7318
USD/CAD 1.5315 1.5314 0.0001 1.5317 1.5343
AUD/USD 0.5049 0.5080 -0.0031 0.5048 0.5085

USD/JPY climbed back above the 20-day moving average on its way to a 12-day high of 125.19 as traders feared that the Japanese economy faces medium-term contraction while victorious PM Koizumi attempts to melt down the opposition of the conservative factions of his party and implementing the sweeping changes that he promised. In fact, growing concern over Japan's weak economy is expected to force Koizumi to make compromises to his structural reform agenda and compile a sizeable supplementary budget despite the coalition party's strong showing in Sunday's election.
Corporate sentiment among Japan's major manufacturers deteriorated for the eighth straight month in July as the stock market continued to slump, exports declined and unemployment remained at a record high, according to the BridgeNews "tankan" survey of company planners. Major non-manufacturers remained cautious about future business conditions, with sentiment stagnant for the third month in a row.
Japan's seasonally adjusted industrial and mining production fell 0.7% in June from May to 97.8, worse than the Ministry of Economy, Trade and Industry's projection of a 0.3% gain, METI said. Also, the June figure was worse than the average market expectation of a 0.3% drop.
The upside was accelerated by buy-stops at 124.90. While it pierced a short-term resistance at 125.04, USD/JPY still needs to tests the resistance of the 125.50 Gann 50-point pivot that targets 125.00 and 126.00.
Fifty-three percent of Japanese corporate planners expect the BOJ's next monetary policy shift to be an easing, according to a survey by BridgeNews, up from 46% in the previous survey in June. Of the total, 7% expect the BOJ to tighten, compared with 9% in the previous survey and 41% said they weren't sure what the next move would be, compared with 45% in the last poll.
The outlook is mixed to slightly bullish.

Support: 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 124.46 (20-day moving average), 123.23 (overnight low), 122.92 (60-day moving average), 122.70 (July 20 trough).
Resistance: 125.19 (overnight high), 125.50 (Gann 50-point pivot; targets: 125.00/126.00), 126.15 (July 6 high; 3-month high), 126.84 (April 2 high; 29-month high), 127.00 (Gann 50-point pivot; targets: 126.50/127.50).

EUR/USD has remained stagnant since peaking Thursday at a 2-month high of 0.8825. The pair trimmed losses made within Friday's trading borders and is hovering around the 100-day moving average at 0.8744.
The outlook is mixed as traders are looking for new leads.

Support: 0.8744 (100-day moving average), 0.8723 (overnight low), 0.8617 (20-day moving average), 0.8350 (July 6 low; 7-month low).
Resistance: 0.8774 (overnight high), 0.8790 (38.2% Fibonacci retracement level of the June-October downtrend), 0.8825 (July 26 peak; 2-month high), 0.8848 (61.8% Fibonacci retracement level of the Nov. 27-Jan. 5 uptrend), 0.8883 (200-day moving average).

EUR/JPY rose in tandem with USD/JPY to mark a 2 1/2-month high of 109.53.
Traders are now targeting 109.72, the May peak.
The outlook is slightly bullish.

Support: 108.02 (overnight low), 107.53 (100-day moving average), 107.26 (20-day moving average), 105.87 (60-day moving average), 105.80 (38.2% Fibonacci retracement level of May 1999-October 2000 downtrend), 105.12 (200-day moving average), 104.54 (June 20 low).
Resistance: 109.53 (overnight high; 2 1/2-month high), 109.72 (May 16 high; top of consolidation area), 111.02 (50% Fibonacci retracement level of May 1999-October 2000 downtrend).