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By XE Market Analysis August 8, 2013 12:47 pm
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    XE Market Analysis: Asia - Aug 08, 2013

    The dollar extended losses as intra-day accounts keyed off a weak technical backdrop. The USD index posted a sustained move under the 200-dma on Wednesday and this fueled a break below 81.00. A light U.S. data/event calendar left the focus on risk assets. Sentiment rose overnight on good China and German trade data. In the U.S., weekly jobless claims rose 5k to 333k, but barely changed the market picture intra-day. The dollar sell-off was a slow burner as several currencies closed in on key technical levels, which eventually gave way in thin summer trade.

    [EUR, USD]
    EUR-USD edged out highs close to 1.3400 as last week's post-Fed spike high was cleared away at 1.3345 overnight and is on course to test the double top from June 18-19 around 1.3415-20. Movement on the topside was hard work again. A reserve manager was spotted into 1.3370 and U.S. corporate hedging was noted via large U.S. names. The short term picture will encourage hot money flows and day traders to buy dips. However, there may be only a limited window for dollar weakness as Fed taper risk is likely to pick up into September.

    [USD, JPY]
    USD-JPY broke the bottom of the range as heavy trust bank bids gave way at 96.00 and it extended to 95.81 lows. There are more sizeable two-way orders concentrated around 95.80, where bids are reportedly protecting another round of stops lower down. The market has turned very bearish on this pair over the course of the week. The BoJ decision was uneventful overnight. It held policy unchanged and the statement from Kuroda was disappointing for those looking for currency talk. The USD-JPY downturn also mirrored more heavy losses via the Nikkei. Since it broke the key 14k level it has extended below 13,400.

    [GBP, USD]
    Cable continued the post-BoE rally and moved to 1.5574, forcing more pain on long-term shorts. Carney clarified the BoE's position on guidance today via BBC radio. He said it was about achieving the inflation target in a balanced and responsible way and policy will be guided by what happens on the ground. Carney said it has provided the maximum amount of transparency to secure the recovery. Markets reacted sceptically to the contingencies in the new guidance, linked to inflation. Both money market rates and sterling rose sharply. It wouldn't surprise us to see Carney take the opportunity to warn against an unwarranted rise in rates again at some point if this move continues.

    [USD, CHF]
    CHF struggled to sustain easier levels despite the stock rally, which was a symptom of dollar weakness. A USD-CHF move through large bids at 0.9190 triggered stops after the London close and it headed into 0.9175. This forced EUR-CHF from 1.2315 back below 1.2300. Early in the session, a U.S. technical desk put a long EUR-CHF trade just ahead of 1.2300, targeting 1.2650 with a stop at 1.2200.

    [USD, CAD]
    USD-CAD headed under 1.0350. There was talk of London fixing flows and it remained heavy after European accounts headed for the exit. Ahead of Friday's Canada job report it looked as if some names were taking the opportunity to close out weak long positions as a series of short term support levels gave way. Once 1.0350 gave way bids at 1.0345 and 1.0340 were quickly filled and it eventually headed towards 1.0320.

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