<Dollar/Yen>

Net-long yen increased from 8,952 contracts to 11,121 contracts on the IMM but the increase has not been too rapid. Sell orders for Japanese actual demand has decreased from 80's to 79's and now is at about 79.5-79. We believe the Dollar is going to move with minor fluctuations. As Japan MOF announced on its website that it will take a firm decisions, the possibility of actual intervention increases. However, large scale of selling is unlikely to happen.

The market is now afraid of willful intervention from Japan if the dollar slides to 77 against the Yen. If Japan really intervenes at 77, the dollar will rise and make a perfect level for export companies to sell the dollar. Even if Japan does not intervene, the dollar is still heavy from 79.5 so it is better to sell the dollar. However, it is hard to sell below 77.50.

Expected Range: 77.50-79.85   Sell the dollar on rallies

<Euro/Dollar>

The euro fell to 1.2289 on June 1 against the greenback but sprung back to 1.2750's on June 18 because of Greek legislative election on June 17. Ironically, the euro rose and made a high record after the coalition government was formed, but fell afterwards.

Although the euro came back to almost 1.2700 after falling to 1.2400 (ESM decision in EU leaders meeting that direct capital injection into banks was possible), it again started falling because of no coherent policy. The euro slumped on July 20 with Comunitat Valenciana asking its central government for a bailout and ECB stopped using Greek bonds as collateral. Hitting 1.2100 has potential dire consequences.

Checkpoint is at 1.2000 but final target is at 1.1650. If 1.1650 gives no support, the euro may even slide to 1.0700.

Expected Range: 1.1950-1.2350   Sell the euro

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