Japanese Preview

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Interest Rates US: Japan: Eurozone: UK: Switzerland: 1.75% 0.15% 3.=
25% 4.0% 1.25-2.25% [IMAGE] =09 [IMAGE] Japanese Forex Trading Pre=
view January 31, 7:00 PM: EUR/$..0.8578 $/JPY..134.90 GBP/$..1.4093 $/CHF.=
.1.7207 Japanese Forex Trading Preview by Darko Pavlovic No key data. T=
he dollar is trading off its fresh 3-years high of 135.14 yen on combinati=
on of possibility of S?downgrade; fall in PM Koizumi's popularity and marke=
ts optimism about the US recovery. Standard & Poor's rating agency said Jap=
an faces the risk of a third rating downgrade in a year because its economy=
has fallen into a worrisome'' deflationary recession. " Furthermore, ove=
rnight comments by MoF Mizoguchi did little to stem the bearish sentiment t=
owards the yen, since he said that while Japan was not driving the yen down=
, it was still correcting from excessive strength. Japanese network Tokyo C=
hannel 12 showed Prime Minister Koizumi's popularity fell to 34.7% after he=
fired Foreign Minister Tanaka compared with a 64.4% rating two weeks earli=
er. Markets were uneasy about Koizumi's political decision, since it could =
impede the implementation of structural reforms. US Secretary of Treasury O=
'Neill said that he had no sympathy for US manufacturers who are complainin=
g about the strong dollar and expressed his hope about the economic recover=
y. At the current World Economic Forum in New York, Fuji Xerox's Chairman a=
nd CEO Yotaro Kobayashi said today that it would be acceptable for the yen =
to weaken to 140 per dollar, but a fall below that to 150-160 per dollar wo=
uld create trouble since "it may have a major negative impact on interest r=
ates and on our trade relationship with the United State or other countries=
" Kobayashi also pointed out that the falling yen would ameliorate Japan's =
deflationary spiral, but warned that too steep a plunge would push up real =
interest rates that would hinder Japan from clawing back out of its fourth =
recession in the past ten years. Foreign investors were net sellers of Japa=
nese equities for a second week in the five days ended Jan. 25. Nikkei fell=
below 10,000 yesterday for the first time since Oct. 10 as Japanese stocks=
remain lethargic, reflecting the poor outlook of Japanese economy. Japan =
has been pressured by other Asian nations, such as China and South Korea, t=
o stem the yen's decline as it makes their exports less competitive. Japan =
December housing starts fell 12.9% from a year-earlier to 95,431 units, due=
to weakening consumer desire for mortgages as unemployment continues to ri=
se. Resistance is seen at 135.25, 135.80 and 136. Support holds at 134.50, =
134, and 133.70. The euro fell two-third cents to a 3-session low of 85.7=
9 against the triumphant dollar, dragged by the rise in German CPI to 0.9% =
m/m in January from the previous 0.1% and upbeat market sentiment about the=
US recovery. Preliminary data from several German states indicated that th=
e upswing in prices resulted primarily from rising food prices and increase=
s in taxes rather than euro cash related markups. Since German prices excee=
ded forecasts and because they tend to be be indicative of an overall rise =
in Eurozone inflation in January, analysts believe the European Central Ban=
k is unlikely to lower interest rates when it next meets to determine monet=
ary policy on February 7. This was evident in ECB Wellink's statement that =
there is no need for monetary policy action to counter the effect of the eu=
ro on prices. Support is seen at 85.55-- the 71.8% Fibonacci retracement of=
the move from 82.25 to 95.95, backed by 85.0. Upside capped at 86.60, 87.0=
and 87.50. The first piece of data markets will look at Friday is the Jan=
uary US labor market report. Although the unemployment rate is forecasted t=
o creep higher to 5.9% in January from the previous 5.8%, non-farm payrolls=
are seen to improve to between 27k and 50k from 124k in December. The a=
pparent contradiction between the aforementioned variables is explained by =
the unrelenting climb in continued claims to 3,382,000 in the week of Janua=
ry 19 from the previous revised 3,361,000, whereas the US 4-week average fe=
ll to its lowest level since August 2001 to 386k in the week of January 26 =
from the previous revised 401,250. The greenback overlooked this week's ris=
e in US jobless claims to 390k from the previous revised 360k, since it cam=
e in below the 400k-level. Following tomorrow morning's labor report, the d=
ollar is likely to find support from the release of the ISM (formerly NAPM)=
Purchasing Managers Index as it looks poised to jump to 49.4 in January fr=
om the previous 48.2, possibly even breaching the key 50-level. Various com=
ponents of the index, including production, new orders and employment, are =
forecasted to exhibit a similar expansion. The University of Michigan confi=
dence survey is not anticipated to generate waves in FX markets, as forecas=
ts call for the final January reading to remain virtually unchanged at 94.3=
. Meanwhile, traders will also be monitoring this week's World Economic For=
um in New York and next week's G7 meeting in Toronto for any dollar policy =
rhetoric in light of the recent complaints about the strong dollar by manuf=
acturers. =09[IMAGE] Audio Mkt. Analysis Yen Battered Across the Board =
Articles & Ideas USD/JPY: ONeill, Koizumi and January Effect Fed M=
oves On, Dollar Moves Up Articles & Ideas Forex Glossary Economic I=
ndicators Forex Guides Link Library [IMAGE] =09
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