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By XE Market Analysis April 14, 2015 2:36 pm
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    XE Market Analysis: Asia - Apr 14, 2015

    The dollar sold off sharply in N.Y. trade on Tuesday, following softer retail sales data, and despite the uptick in core PPI. EUR-USD rallied to 1.0707 highs from opening levels near 1.0560, as USD-JPY dropped from 120.12 into the open, to lows of 119.07. Position squaring was a cited factor, especially in EUR-USD, while lower yields helped pressure USD-JPY, to better than one week lows. USD-CAD fell under 1.2450, as oil prices moved higher, while cable ran up over 1.4790 from lows under 1.4640.

    [EUR, USD]
    EUR-USD was on a tear higher since the U.S. data, rallying from 1.0560 N.Y. session lows to a high of 1.0707. A solid short squeeze was behind much of today's euro gains, which started following better EU production data, and was helped by an EU growth upgrade from the IMF. Greece of course remains on the radar screen, with officials complaining about Greece's slow progress on reforms. This should limit EUR-USD gains for now, though another round of short covering can't be ruled out near term, with a move over 1.0700 likely to see last Thursday's 1.0788 highs targeted.

    [USD, JPY]
    Japan PM advisor Hamada qualified comments about USD-JPY 105 PPP being "acceptable", noting that 120.00 is acceptable and Monday's remarks were just referring to PPP, not the spot value. The "clarification" resulted in USD-JPY rallying over 120.10 from the 119.65 area. Gains were short lives, as the pairing dove initially under 119.50 from over 119.90 following the U.S. data, and later to 119.07 lows. Softer U.S. yields kept the dollar down into the close.

    [GBP, USD]
    Sterling has put in a mixed day, gaining against the underperforming dollar but falling against the euro and near net unchanged against the yen (having recovered from a five-month low). An unexpected dip in UK March core CPI to a cycle low of 1.0% y/y from 1.2%, along with concerns about the May-7 election have afflicted sterling's performance in cross pairings.

    [USD, CHF]
    EUR-CHF has drifted to 10-week lows of 1.0320, the lowest since January 29 amid the latest bout of euro underperformance. While this is the case, the SNB will probably be best advised to sit on its hands, although the SNB said at its March policy review that the franc is "significantly overvalued and should continue to weaken over time," and that it will continue to take account of the franc rate situation in policy decisions and "remain active in the foreign exchange market, as necessary."

    [USD, CAD]
    USD-CAD cracked the 1.2500 mark, trading to 1.2445, a one-week low following the U.S. data. The combination of a broad USD post-data sell-off, and oil prices remaining at the top of their recent range supported the CAD, as did USD-CAD selling into the Bank of Canada announcement on Wednesday, where it is widely expected to leave its policy rate on hold at 0.75%. The 50-day moving average, currently at 1.2479 may provide some interim support. A close under the level will be needed to keep CAD bulls in charge.

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