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By XE Market Analysis February 3, 2014 3:45 pm
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    XE Market Analysis: Asia - Feb 03, 2014

    The dollar was mostly lower in N.Y. trade on Monday, as risk-off conditions returned in force, to start the month of February. Equities took another nose-dive, as the January U.S. manufacturing ISM index tumbled. The dollar slid following the data, taking EUR-USD to 1.3535 highs, from 1.3490, and USD-JPY under 101.10 from 101.80. Treasury yields moved lower, also adding weight to the greenback. The FX marlet is already looking ahead to key risk events later in the week, where the ECB meeting and the U.S. jobs report are on tap Thursday and Friday, respectively. In the lead-up, we generally look for the FX market to trade defensively, which could keep recent ranges intact.

    [EUR, USD]
    EUR-USD has given back the 1.3500 handle, trading to lows of 1.3490 in relatively light dealings. Ongoing chatter over the potential for an ECB rate cut this week should keep the euro's upside contained, while Draghi seeks Buba backing for end of SMP sterilization. A report suggested Draghi would only consider ending the sterilization of SMP bond purchases if he is openly backed by the Bundesbank. Such a move has been tagged as one of the options for the ECB this week. Nerves remain however, as EM issues continue to ripple through the markets, and as risk-off remained in place following soft U.S. ISM data, which took the euro back over 1.3535.

    [USD, JPY]
    USD-JPY stops were run earlier from the 101.50 level, with a couple of U.S. names the sellers of note from 101.70. The pairing gapped immediately under 101.40, and headed to 101.10 lows. Risk-off was again in effect, and supported the yen through the session. Bids are creeping in at 101.00, though another downdraft of risk taking could see another layer of stops under the figure taken out.

    [GBP, USD]
    Cable's double rejection from forays above 1.6600 in late January has left a bearish tone in place, with the pair subsequently breaching both its 20- and 50-day moving averages. Big support at 1.6395-1.6400 was easily taken out into the N.Y. open. The Jan-6 low of 1.6337 and the mid-January low of 1.6307 were both violated in N.Y. dealings, resulting in a low print of 1.6297.

    [USD, CHF]
    EUR-CHF sank to a six-week low as risk aversion found fresh impetus from a six-month low in official China manufacturing PMI data. This came despite SNB-speak affirming that a removal of the 1.20 limit would only be considered if inflation was much higher. Key support is marked at 1.2200, ahead of the Dec-17 cycle low of 1.2167. We don't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    USD-CAD backed away from the 1.1200 level, after trading to trend highs of 1.1199. Defense of option barriers at the figure was reported, which saw the pairing slip back under 1.1165. Support is now seen at 1.1150-40, with sell stops noted under 1.1120. The pairing touched 1.1151 lows in morning trade, before bouncing to 1.1185, and settling in near 1.1160.

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