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By XE Market Analysis December 24, 2013 12:18 pm
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    XE Market Analysis: Asia - Dec 24, 2013

    FX trade was very quiet on Christmas eve in N.Y., with major dollar pairings holding inside of very tight ranges. Stronger durable goods orders, firmer housing prices, and improved new home sales helped sentiment, resulting in a firmer dollar, and yet another modest Wall Street rally. EUR-USD edged into 1.3655 from highs of 1.3685, while USD-JPY was steady around 104.25-35.

    [EUR, USD]
    EUR-USD eased some following the stronger U.S. data, dipping from 1.3685 to 1.3655 in very light dealings. The euro continues to struggle over 1.3700, and we expect further downside potential into the new year, as U.S. economic prospects improve, and as the Fed's taper program steps in.

    [USD, JPY]
    USD-JPY was dead in the water on Tuesday, stuck largely between 104.25 and 104.35. USD-JPY's major-trend peak at 104.63 and 104.50 are marked as resistance now, though we continue to target 105.00 in the near term, on the back of further BoJ easing, coupled with Fed tapering.

    [GBP, USD]
    We continue to target 1.6500 in Cable. Resistance is marked at 1.6400, support at 1.6320 and 1.6320. S&P last week affirmed the U.K. 's triple-A rating but kept a negative outlook, saying that the country would be vulnerable to a downgrade if growth was not sustained (the main risk to which stems from Eurozone). Cable has been in a bullish trend for six months, reflecting a trade-weighted appreciation of the currency over this time as U.K. recovery took hold. We anticipate more of the same during the early part of 2014. Forward looking survey evidence, such as from PMI order data, and the CBI industrial trends survey, strong mortgage lending figures (which signal house price potential two to four months down the track), support this view.

    [USD, CHF]
    The Swiss currency's safe haven premium has unwound some now that the period of Fed policy uncertainty is over. EUR-CHF breached above 1.2250 last week, well up on the pre-Fed eight-month low of 1.2166. Resistance comes in at 1.2280, marks a series of former lows seen between October and November. Support is now at 1.2220 and 1.2200. USD-CHF faces resistance at 0.9000, but can be expected to breach this over the coming sessions.

    [USD, CAD]
    USD-CAD managed a 1.0610 to 1.0635 trading band in North America on Tuesday, staying relatively low following the better Canadian GDP revealed on Monday. Dealings were thin overall into the holidays, though looking forward, the loonie may continue to trade on a firmer footing, with both the Canadian and U.S. economies looking to recover further.

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