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By XE Market Analysis December 27, 2013 12:21 pm
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    XE Market Analysis: Asia - Dec 27, 2013

    The dollar rebounded from its overnight losses, unwinding most of the damage done in London. Trade was very thin, and it didn't take much volume to push EUR-USD back under 1.3770, after it peaked over 1.3890 into the N.Y. open. USD-JPY traded over 105.00, though struggled some over thee figure, while USD-CAD moved over 1.0700 on U.S. fund repatriation. Cable, which had vaulted up to over 1.6575 in Europe, settled in near 1.6500 in late dealings. There was no data to push the market, though the U.S. 10-year yield inched over 3.00% briefly, while stocks idled on either side of flat. With the weekend at hand, and just two trading days left in the year, we look for quiet action into 2014.

    [EUR, USD]
    EUR-USD settled into 1.3800 early in the N.Y. session, down from its spike over 1.3890 in London. Asian central bank and option backed buying was noted on the way up, which triggered stop loss orders. Very low liquidity exacerbated the move, and given the lack of fundamental reasons for the move, it was not too surprising to see the pairing ease back through the morning. EUR-USD's rather exuberant London rally continued to come undone, with the pairing off nearly 130 points from its peak, dipping under 1.3765.

    [USD, JPY]
    USD-JPY lifted above 105.00 for the first time since 2008, leaving a high of 105.03 before retreating to the 104.70 area following the Tokyo fix. In N.Y. trade, the pairing struggled over the 105.00 mark, just managing to print the figure. Thick Japanese offers are reportedly in place from the figure, with exporters and year-end repatriation flows noted. We may see some consolidation for now, though risk is that the dollar could test higher, with Japan out on holiday for most of the week.

    [GBP, USD]
    Cable blew through our 1.6500 target, peaking over 1.6575 in concert with EUR-USD's sharp move higher. As the euro fell back though, sterling followed, edging under 1.6500 in late trade. 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. N.Y. trade on Friday saw the cross inch back into initial support, though conditions were thin and quiet.

    [USD, CAD]
    USD-CAD was up flirting with the 1.0700 handle, up from London lows near 1.0620. The CAD remained on the back foot despite the pop in oil and gold prices, as traders cited U.S. fund repatriation flows. Last week's 1.0737 multi-year high will be the initial upside target, and thin liquidity could see the level targeted. Stops are likely sitting above 1.0740, which could result in interesting price action if tripped.

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