By Jim Cote
Chicago, July 6 (BridgeNews) - Following the week's sharp gains by the U.S. dollar, consolidation in the form of profit-taking and position-squaring appear to be the hallmarks of the session thus far. The euro registered a new eight month low overnight before finding profit-taking support at 0.8350. The yen fell further in conjunction with the sharp drop in Japanese equities and general economic weakness. The 126.00 terrain is the new yen price battleground.
The rate of U.S. unemployment is expected to rise to 4.6% in June from 4.4% the previous month, when non-farm data are released at 1230 GMT. The forecast was made in a BridgeNews survey of 37 analysts. Estimates ranged from 4.5% to 4.7%. Current Previous Change Global Global
NY open NY close low high

USD/JPY 126.00 125.68 0.32 125.48 126.03
EUR/USD 0.8392 0.8369 0.0023 0.8352 0.8407
EUR/JPY 105.76 105.21 0.55 104.88 105.79
GBP/USD 1.3989 1.4024 -0.0035 1.3972 1.4033
USD/CHF 1.8137 1.8160 -0.0023 1.8107 1.8219
USD/CAD 1.5137 1.5128 0.0009 1.5118 1.5155
AUD/USD 0.5045 0.5140 -0.0095 0.5043 0.5143
NZD/USD 0.4011 0.4036 -0.0025 0.4004 0.4047 SP.1 1217.00 Bridge N/A -5.30 1214.50 1223.60 ND.1 1735.00 Bridge N/A -23.00 1729.00 1763.00
USD/JPY is seen rising further as Japanese stock index futures fell sharply Friday with sentiment hurt by the slump on the cash market, which continues to be plagued by falling high-tech heavyweights such as Advantest, Tokyo Electron and Sony, traders said.
The lead September contract of Nikkei 225 futures ended the day down 340 points, or 2.7%, at 12,270 on volume of 32,575 contracts. Traders said market participants were dismayed to see the key 12,500 support level breached by both the cash and futures markets. There was market talk that investors, possibly foreign investors, were sellers of the 20-year cash bonds, and brokerage firms, who bought the 20-year paper from the investors, might sell Sep futures as a hedge because they could not sell the 20-year paper to the BOJ's rinban operation. In addition to market talk of foreign investors' selling, domestic pensioners were said to be sellers of the 20-year super-long, a trader at an offshore securities firm said.
The outlook is bullish amid Japanese economic concerns.

Support: 125.50 (Gann 50-point pivot; targets: 125.00/126.00), 125.48 (overnight low), 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 123.73 (20-day moving average), 122.50 (Gann 50-point pivot; targets: 122.00/123.00), 122.37 (60-day moving average).
Resistance: 125.97 (overnight high), 126.84 (April 2 high; 29-month high).

* The French economy grew at a weaker-than-expected 0.5% pace in the first quarter of this year as exports and fixed business investment slowed sharply, according to final GDP data issued by national statistics institute INSEE. On a year-over-year basis, first quarter GDP growth was 2.7%.
ECB Vice President Noyer has said that euro developments have been extremely satisfactory so far. The comments come after the single currency hit a year-low of $0.8350 Thursday afternoon. Noyer also maintained that the current level of interest rates was appropriate for maintaining price stability in the medium term, and that the economic slowdown in the area was limited and growth would stay in line with potential. Noyer said the debate about successor to ECB President Wim Duisenberg was not helping the single currency. "It is very upsetting that this debate is developing," he said. "I believe the succession debate is very detrimental to the EU and the euro."
Speaking on CNN, Eurogroup chairman Reynders has stressed that he regards the ECB as an independent institution and that he is sure the EU-12 have a good capacity for growth.
Reynders' comment on the ECB's independence will reassure the markets to some extent, given his previous calls for more political input to the bank's decision making. If today's comment marks a backing away from this stance, one potential negative for the EUR will have been diminished. However, as euro-zone growth slows, calls for more political involvement in interest rate policy from the euro zone's politicians are likely to be renewed.
The Danish central bank has cut its repo rate by 5 bps to 4.95%.
The EUR/USD outlook is mixed.

Support: 0.8352 (overnight low; 7-month 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: 0.8407 (overnight high), 0.8525 (20-day moving average), 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 has consolidated between roughly 106.21 and 106.06 since June 29. The overall trend is down, and an eventual downside break from the recent consolidation is favored. Beneath the market there is a support band from the June 20 low of 104.55 down to the major Feb. 16 low of 104.18. The outlook is slightly bullish near-term.

Support: 105.50 (20-day moving average), 104.88 (overnight low), 103.93 (200-day moving average), 99.85 (June 1 low; 5 1/2-month low), 97.22 (Dec. 12 trough).
Resistance: 105.80 (38.2% Fibonacci retracement level of May 1999-October 2000 downtrend), 106.25 (60-day moving average), 106.52 (overnight high). For additional levels see story .877.

* The GBP/USD has fallen in the wake of data which showed that U.K. industrial production fell a far below forecast 0.9% month-on-month in May while manufacturing output was similarly weak, also falling 0.9% month-on-month. Cable has dropped to a 2-week low of 1.3972 while EUR/GBP has pushed to an intraday high of 0.6007.
The outlook is slightly bearish.

Support: 1.3972 (overnight low), 1.3688 (June 12 low; 15 1/2-year low), 1.3660 (February 1986 trough).
Resistance: 1.4033 (overnight high), 1.4037 (20-day moving average), 1.4184 (60-day moving average).