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By XE Market Analysis December 5, 2013 2:29 pm
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    XE Market Analysis: Asia - Dec 05, 2013

    The dollar lost ground nearly across the board in N.Y. trade on Thursday, with cable being about the only exception. A strong Q3 GDP revision (largely from inventory build) combined with a sub-300k jobless claims print (still with seasonal adjustment problems), to bring Dectaper talk back to the forefront. Yields edged higher, as Wall Street stumbled, though the dollar sagged, most prominently against the euro. The ECB left rates alone as expected, and maintained an easing bias. However, with some expecting some nugget of easing, EUR-USD firmed up sharply on short covering. The pairing dipped to 1.3544 following the U.S. data, before rallying sharply to highs of 1.3674. USD-JPY meanwhile ran stops at 102.00 and 101.80 on its way to one-week lows. Elsewhere, USD-CAD bounced off 1.0700 again after soft Ivey PMI data, as cable bucked the trend and edged into 1.6300.

    [EUR, USD]
    EUR-USD found support under 1.3550 after the U.S. data, and quickly moved to highs of 1.3631. The lack of ECB action has prompted some short covering, as some had expected some nugget of easing from the Bank. This said, with inflation forecasts lowered, we wonder how much upside is left for EUR-USD. Further gains were in the cards however, as the pairing managed highs near 1.3675, and held firm through the remainder of the session.

    [USD, JPY]
    USD-JPY maintained a steady tone over 102.00 through the morning session, though later, a stop hunt into the London close was fairly successful. Sell orders at 102.00 and 101.80 were tripped up, on its way to 101.63 lows. The pairing recovered back to near 101.80, though residual offers at the level stopped upside progress. A N.Y. close under 102.00 should keep the downside pressure on USD-JPY, and could result in more long liquidations in Asia tonight.

    [GBP, USD]
    Sterling has consolidated after outperforming in the early part of the week, with yesterday's sub-expectations services PMI offsetting the very strong construction and manufacturing PMI releases from earlier in the week. Cable failed to hold the 1.6400 handle in London, with strong selling interest noted at the time. The pairing may have run out of steam for the time being, and a push toward 16500 may need to wait until some longs have been squeezed out. GBP-USD based at 1.6300 in N.Y. dealings.

    [USD, CHF]
    The CHF has been well bid this week, making a one-month peak versus the USD and a two-month high against the EUR, and we expect more of the same. This said, the cross got a small reprieve from the ECB, which saw EUR-USD outperform, though the rekindled U.S. Fed tapering view has proven supportive for the safe haven Swiss currency, as this backdrop has elicited risk aversion in global markets. We also anticipate a firm U.S. jobs report on Friday, which in the event should strengthen the possibility of the Fed commencing a tapering program as soon as this month.

    [USD, CAD]
    USD-CAD was unable to reclaim the 1.0700 handle, after 1.0710 stops were spared in North American trade on Wednesday. The pairing peaked at 1.0684 in early London trade, and slipped to lows of 1.0653 into the open. USD-CAD longs may have become a bit overstretched, and we see risk of a profit taking related pullback toward 1.0600 in the near term. USD-CAD ran up to 1.0699 from 1.0685 after the weaker Ivey PMI print, though came to an abrupt halt, and reverted back toward 1.0625. Domestic offers were reported at 1.0700, and may continue to protect sizable stops seen at 1.0710 for now.

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