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By XE Market Analysis December 31, 2014 1:35 pm
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    XE Market Analysis: Asia - Dec 31, 2014

    FX trade was very quiet on the final day of the year, though EUR-USD managed to make new 2.5 year lows of 1.2098, as the dollar elsewhere moved higher. Weekly jobless claims were firmer than expected, while the Chicago ISM missed the mark as well, though the outcomes were largely overlooked by the markets. Equities ended the year on a higher note, as yields were nearly static. USD-JPY rallied over 119.90 from lows near 119.50, as USD-CAD reclaimed the 116 handle on lower oil prices, as cable idled under 1.56 through the abbreviated session.

    [EUR, USD]
    EUR-USD took out Monday's 1.2125 trend low, basing at 1.2097 in very light dealings. London and the Continent cleared out early for the year, leaving just disinterested North American desks to tend to the FX market. The euro's next major downside target is the 1.2043 level, representing the July 23, 2012 weekly low.

    [USD, JPY]
    USD-JPY climbed over 119.90 in very light trade, after finding a base into 119.50. We remain bullish with 'Abenomics' policies likely to maintain the dollar's yield advantage over the yen, even if Fed tightening prospects remain tentative.

    [GBP, USD]
    Cable remains in the grip of a bear trend, which has been persisting since the July cycle high at 1.7192. Resistance is now marked at 1.5634 (20-day moving average) and 1.5700, support at 1.5500 and 1.5486. The August 2013 low at 1.5102 should be in the crosshairs of bears. The drop in UK inflation to a six-year low of 1.0% has strengthened the dovish voices at the BoE's MPC.

    [USD, CHF]
    EUR-CHF has established a range below 1.2050 after spiking to a 1.2096 peak Dec-18 after the SNB implemented a negative interest rate of -0.25%. SNB member Zurbruegg recently argued that a negative interest rate would be an effective tool as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs. SNB boss Jordan had said recently that upward pressure on the franc has "intensified," and the central bank said it will enforce the cap with "utmost determination" and is prepared to take further steps if necessary.

    [USD, CAD]
    USD-CAD based at 1.1565 in light year-end trade, before rallying to 1.1618 highs. New trend lows in oil prices supported, with WTI easing under $52.50.

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