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Date: Thu, 24 Jan 2002 05:14:32 -0800 (PST)
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[IMAGE] Forums Discuss these points in the Forums:  Forexnews Forum       T=
echnicals Live Charts Analysis available from: Cornelius Luca   J.P. Chorek=
   Technical Research Ltd.   Charts & News featuring Standard & Poor's     =
   Interest Rates  US: Japan: Eurozone: UK: Switzerland:   1.75%  0.15%  3.=
25%  4.0%  1.25-2.25%        [IMAGE]   =09 [IMAGE]  USD Surges Before Green=
span Heads to the Hill January 24, 7:00 AM: EUR/$..0.8756 $/JPY..134.40 GBP=
/$..1.42299 $/CHF..1.6762  USD Surges Before Greenspan Heads to the Hill by=
 Jes Black  At 8:30:00 AM US Jobless Claims (exp 385k, prev 384k) Event: At=
 10:00 AM Greenspan speech  The dollar broke through overnight highs agains=
t the European majors and climbed to a new 39-month high of 134.77 yen ahea=
d of a much-anticipated speech by Fed Chairman Greenspan today at 10:00 AM.=
 The speech before the Senate Budget Committee is expected to be more upbea=
t than his last, but dealers are likely to hold back on further dollar bidd=
ing as they pay heed to Greenspan's words.   Gains in USD/JPY outpaced the =
crosses, which actually fell to 3-day lows. EUR/JPY fell to a low of 117.60=
 from an overnight high above 119.00. GBP/JPY also fell to a low of 191.05 =
after hitting an overnight 30-month high of 192.20 on weak yen sentiment. T=
his divergence is one of the catalysts to the dollar's strong gains against=
 EuroFX today.  EUR/USD fell to a 1-month low of 87.59, dangerously close t=
o key channel support at 87.50 which marks the 31.8% Fibonacci retracement =
of the move from 82.25 to 95.96. A break below that level would likely call=
 upon further steep losses as the single currency has consistently failed t=
o maintain above 90-cents. Temporary moves higher are not seen by the marke=
t as indicating strength, and are regarded as selling opportunities, dealer=
s say.  The euro is likely to remain under pressure in the near term after =
sliding across the board on Wednesday following European Central Bank presi=
dent Duisenberg's assertion that interest rates are on hold for the time be=
ing and that Germany's rising budget deficit was a further concern. By stra=
ightjacketing Germany, the ECB has nearly assured that the economy's engine=
 of growth will continue to lag behind the rest of the Eurozone.  A more po=
sitive response is expected from Greenspan today after markets concluded th=
at the Fed Chairman probably sounded more pessimistic about the economy tha=
n he intended in his speech on January 11. Moreover, given the recent squab=
ble between Democrats and Republicans over who wasted the surpluses, Greens=
pan is also is likely to be questioned on his support for last year's tax c=
uts which Democrats claim are responsible for the elimination of budget sur=
pluses and subsequent return to deficits.  The US budget surplus was once p=
rojected to total more than $5 trillion over the next 10 years, but recent =
estimates by the Senate Budget Committee show that the recession is likely =
to cost $1.366 billion on top of the $1.683 bln that will go to present and=
 future tax cuts. Senate majority leader Daschle is likely to argue for a s=
uspension of future tax cuts. But, Greenspan may reiterate his support for =
tax cuts to hasten and ensure a rebound, especially since it would spur con=
sumer spending and stem the reduction in business investment. He will also =
likely say that the budget became a deficit due to the recession, and the r=
esultant war following the September 11 attacks.   Nevertheless, the recent=
 budget deficits projected by the CBO on Wednesday sent the bond market ree=
ling as interest rates on 10-year Treasuries jumped to almost 5% from 4.91%=
, as the deficit figures were higher than some analysts predicted. This cou=
ld also be a point of contention among Democrats who know Greenspan to endo=
rse lower long term interest rates over deficit spending.  Meanwhile, marke=
ts will also listen to Greenspan's assessment of the economy to gauge wheth=
er there is a chance of a rate cut at the Jan 30 meeting. Interest rate fut=
ures are pricing in only a 22% chance, leaving the majority to believe rate=
s will hold steady at 1.75%, a 40-year low. However, since the dollar index=
 is trading near 6-month highs, most dealers are now divided over whether a=
 further rate cut would help the dollar.  Following Greenspan, the market i=
s likely to react to earnings announcements and the economic outlook from c=
ompanies such as Eli Lilly, Eastman Kodak, Gateway, JDS Uniphase, McDonald =
s, Nokia, Phillips Petroleum, PMC-Sierra, Qualcomm and R.J. Reynolds Tobacc=
o Holdings, who are reporting today. But it is Greenspan's assessment of th=
e economy that is likely to direct Wall Street and the dollar.  While most =
believe the recession will be over this year, the key concern now is that e=
conomists and investors are again uncertain as to how strong growth will be=
 when it resumes. The first question is whether investment spending will re=
cover substantially now that inventory liquidation has run its course? The =
second question is whether consumer final demand will be strong enough in 2=
002 to warrant new business spending?   The risk is that consumers will be =
slow to take on additional debt, given their current debt loads, and this w=
ill cause the recovery to take another fall   called a double dip - until t=
here is a more profound correction from past over investment. This can be s=
een in recent Wall Street losses as investors question the likelihood of fu=
ture earnings growth this year.  GBP/USD broke below key support at 1.4220 =
and plunged to a day's low of 1.4202 after the UK's BCC said service firms =
export sales and orders reached rock bottom with the export balance at -7 v=
s +1 in Q3. BCC says circumstances continue to be dire and sterling's techn=
ical position vs the dollar looks likely to come under further strain if it=
 cannot maintain above 1.4220, which marks the 61.8% Fibonacci retracement =
of the move from the January 8, 2001 high of 1.5101 to the June 12, 2001 lo=
w of 1.3680. Next support is seen at 1.420 and 1.4160. Upside capped at 1.4=
30, 1.4360 and 1.440.  USD/CHF also regained its bullish momentum after a 7=
 franc surge in late December retraced back to 1.6350 earlier this month. S=
wissy rose to a 3-week high of 1.6778 after surging back through resistance=
 at 1.6725. Support is seen at 1.6725 followed by 1.6660/80.     =09[IMAGE]=
 Audio Mkt. Analysis Dollar Hammers All Major Currencies        Articles & =
Ideas  NAM & the Strong Dollar: Phase II   Philly Fed-Supported Optimism   =
    Articles & Ideas Forex Glossary   Economic Indicators   Forex Guides   =
Link Library      [IMAGE]  =09
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