10 August 2001, 21:53  US FX Daily Outlook: Euro extends gains versus dollar, yen

Cornelius Luca //
New York, Aug. 10 (BridgeNews) - The euro marked a fresh three-month high of 89.52 cents in Europe, but profit taking ahead of the weekend might temper its gains in the U.S. session. The dollar trimmed some of its significant Thursday losses versus the yen after Japanese officials expressed concern over the undue strength of their currency. But ongoing disinvestment and profit repatriation will likely reinforce the demand for yen.

Dollar/yen and dollar/Swiss franc rose within Thursday's range, dollar/Canada rose to a 17-day high of 1.5435 on continuing worries over local equities, and sterling/dollar slipped within an inside range.
The only domestic event scheduled for release Friday is the July producer price index, which should show another marginal decrease. Since the Fed is focusing on growth, lack of evidence of inflation would further enable the central bank to cut interest rates in order to stimulate the economy.
Key levels are 122.50, a Gann 50-point pivot that houses a host of option expiries in dollar/yen, and 0.8963, a Fibonacci retracement level, in euro/dollar.

Current Previous Change Global Global
NY open NY close low high

USD/JPY 122.28 121.80 0.48 121.74 122.40
EUR/USD 0.8936 0.8922 0.0014 0.8911 0.8952
EUR/JPY 109.27 108.68 0.59 108.65 109.45
GBP/USD 1.4244 1.4253 -0.0009 1.4244 1.4276
USD/CHF 1.6921 1.6892 0.0029 1.6850 1.6938
USD/CAD 1.5429 1.5385 0.0044 1.5385 1.5435
AUD/USD 0.5152 0.5117 0.0035 0.5115 0.5167

USD/JPY found continued support from Japanese names on the downside and bounced to 122.27 in early morning trade. But the pair failed to bounce above the 122.50 Gann 50-point pivot, which targets 122.00 and 123.00, because of defense of options plays.
Japanese Finance Minister Masajuro Shiokawa demonstrated caution on the strengthening of the yen against the U.S. dollar to 121.39 overnight, but failed to give market players a strong warning against further yen strengthening. Shiokawa said it is unclear whether the overnight move was due to speculative moves or is a normal display of proper market function.
Japan's Cabinet Office revised down the official economic assessment in its August economic report released Friday, saying: "The economy is deteriorating further." The downward revision was mainly caused by worsening in production, employment conditions, housing construction and capital investment, the office said.
Virtually assured success after the Liberal Democratic Party's landslide victory in the July upper house elections, Prime Minister Junichiro Koizumi was chosen to serve another two-year term as head of the most powerful political party in Japan, according an LDP aide. There were no other contenders for the post and so no party election was held.

The outlook is neutral within an inside range.

Support: 121.74 (overnight low), 121.35 (Aug. 9 trough), 121.05 (Gann 50-point pivot; targets: 120.55/121.55).
Resistance: 122.40 (overnight high), 122.50 (Gann 50-point pivot; targets: 122.00/123.00), 123.05 (60-day moving average), 123.09 (100-day moving average), 124.00 (Gann 50-point pivot; targets: 123.50/124.50), 123.87 (20-day moving average), 125.50 (Gann 50-point pivot; targets: 125.00/126.00).

EUR/USD has been lifted to a fresh 3-month high of 0.8952, though USD/CHF has held above the overnight low of 1.6850. Dealers say the SNB was in the market below 1.5050 in EUR/CHF on Thursday, and that there is caution to bid the CHF higher as the Bank is thought to be waiting in the wings to act if it gains ground too rapidly. EUR/CHF has tracked the EUR higher elsewhere to a 5-day high of 1.5097.
Germany's trade surplus in June reached a provisional 13.7 billion Deutsche marks, compared with a revised 14.8-billion-mark surplus in May, the Federal Statistics Office in Wiesbaden said. While trade balance data was mostly in line with forecasts, the German June current account unexpectedly turned into a deficit, measuring 8.7 billion marks, compared with a revised 0.3-billion-mark surplus in May.

The EUR/USD outlook is mixed, with the upside resisted at 0.8963 by the 50% Fibonacci retracement level of the June-October downtrend.

Support: 0.8911 (overnight low), 0.8901 (200-day moving average), 0.8848 (61.8% Fibonacci retracement level of the Nov. 27-Jan. 5 uptrend), 0.8790 (38.2% Fibonacci retracement level of the June-October downtrend), 0.8766 (20-day moving average), 0.8350 (July 6 low; 7-month low).
Resistance: 0.8952 (overnight high; 3-month high), 0.8963 (50% Fibonacci retracement level of the June-October downtrend), 0.9091 (April 5 high), 0.9136 (61.8% Fibonacci retracement level of the June-October downtrend).

EUR/JPY rose within Thursday's range after finding support from the 20-day moving average at 108.59.
The outlook is mixed.

Support: 108.65 (overnight low), 108.59 (20-day moving average), 107.44 (100-day moving average), 106.02 (60-day moving average), 105.80 (38.2% Fibonacci retracement level of May 1999-October 2000 downtrend), 105.91 (200-day moving average), 104.54 (June 20 low).
Resistance: 109.45 (overnight high), 110.15 (Aug 2 high; 3-month peak), 111.02 (50% Fibonacci retracement level of May 1999-October 2000 downtrend).

GBP/USD treaded quietly within Thursday's range.
The intraday outlook is neutral.

Support: 1.4244 (overnight low), 1.4220 (20-day moving average), 1.4208 (100-day moving average), 1.4130 (60-day moving average), 1.3911 (June 20 low), 1.3688 (June 12 low; 15 1/2-year low), 1.3660 (February 1986 trough).
Resistance: 1.4276 (overnight high), 1.4353 (Aug. 2 high; 2 1/2-month peak), 1.4414 (May 21 peak).

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