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By XE Market Analysis August 21, 2013 2:36 pm
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    XE Market Analysis: Asia - Aug 21, 2013

    The dollar rallied through the morning session on Wednesday, though trade was relatively quiet into the release of the FOMC minutes. Better housing data likely helped USD sentiment early, as did defensive reduction of short USD positions. The dollar rallied after the FOMC minutes, as yields moved higher with news that the Fed was mixed on timing, but intends to taper at some point. EUR-USD fell to session lows near 1.3340 from 1.3375, as USD-JPY popped over 97.95 from 97.70. The minutes did not provide clarity on taper timing, as expected. But that doesn't mean that announcement next month is off the table. A few members emphasized the importance of being "patient." But others noted that while a slowing in asset purchases wasn't warranted in July, it "might soon be time" to start to trim purchases

    [EUR, USD]
    EUR-USD opened around 1.3400, and made its way to 1.3370 into the 10:00 EDT options cut. Activity was light, though a flurry of euro selling from European names into the London close saw EUR-USD fall to 1.3354 lows. After the FOMC minutes, the euro dipped to intra day lows near 1.3340 from 1.3375, though returned to pre-release levels into the close.

    [USD, JPY]
    USD-JPY traded a 97.45-75 band through the morning with option expiries keeping the pairing hemmed in. Offers were noted from 97.80 up to 98.00, which effectively capped gains, though in the aftermath of the Fed minutes, the pairing ramped up through 97.95, before retreating again.

    [GBP, USD]
    Cable cleared 1.5700 barriers as specs fished for stops ahead of the FOMC minutes. It will be a relief for London day traders that 1.5700 went before the N.Y. afternoon as price action is likely to be volatile. Given the price action in recent sessions we expect longs to leave trailing stops under 1.5630 and 1.5600. Longer-term buy stops are tipped from 1.5710 and offers should increase in size into 1.5750, where outstanding barriers are noted. June-19 highs at 1.5752 remains the big-picture target.

    [USD, CHF]
    EUR-CHF was fairly steady through the N.Y. session, supported over 1.2300, while finding sellers into 1.2325. The cross moved to session highs after the FOMC minutes, as USD-CHF edged up from 0.9200 support to highs around 0.9235.

    [USD, CAD]
    USD-CAD touched 1.0447 highs overnight, levels last seen on July 11. Risk aversion, softer energy prices, and concerns over central bank stimulus withdrawal have all weighed on the CAD this week, and a breach of 1.0450 after the FOMC minutes brought fresh buyers in. The pairing peaked at 1.0476 following the minutes release.

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