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By XE Market Analysis January 7, 2014 2:34 pm
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    XE Market Analysis: Asia - Jan 07, 2014

    The dollar was mixed in N.Y. trade on Tuesday, generally posting fairly broad gains early on, before giving them back later. A narrower U.S. November trade deficit helped the greenback to an extent, though EUR-USD support into 1.3600 held up, while USD-JPY ran into offers into 104.70. Cable bounced out of 1.6375 support, moving back over 1.6425, while the CAD took a hit after a very soft Ivey PMI outcome. USD-CAD ran up over 1.0760, posting fresh multi-year highs. Meanwhile, equities posted their first rally of 2014, while Treasury yields remained below highs. Trade may taper off overnight, as the markets look to key data on Wednesday. The December ADP employment report is due, along with the minutes from the December FOMC meeting.

    [EUR, USD]
    EUR-USD was steady around 1.3630 in morning trade, though headed briefly under 1.3600 following the N.Y. options cut. From there, the pairing reportedly found a good variety of buyers under the 1.3600 mark, including interest from an Asian sovereign account, a U.K. clearer, and a U.S. custodial name. The wall of bids around the figure prompted some intra day short covering, with the pairing edging up toward 1.3640 after the London close. Buy stops were noted over 1.3650, though never came into view. The pairing settled back under 1.3620 into the close.

    [USD, JPY]
    USD-JPY took out Asian highs of 104.61, peaking at 104.73 before retreating, with buyers initially stepping in on the back of better risk appetite. The move over 104.70 could bring Monday's 104.94 highs into view, though standing offers from 104.70 to 104.90 capped gains. The pairing slipped back to near 104.30 before finding support as, fresh bids reportedly stepped in at 104.25.

    [GBP, USD]
    GBP-USD recovered the 1.6400 handle after dipping to 1.6376. The softer than expected December PMI data provided a speed bump with regard to U.K. economic expectations, though it doesn't change the overall positive outlook for the economy, and a moderation was to be expected after a period of above long-term trend growth. N.Y. trade saw another moderately sell off step in, though support into 1.6370 held, and cable again made its way over 1.6425. We expect this sort of consolidation until perhaps Thursday's ECB meeting or Friday's U.S. jobs report.

    [USD, CHF]
    EUR-CHF firmed up from ahead of the N.Y. open, moving to 1.2365 from 1.2340. The cross touched 1.2373 highs later, though resistance remains at 1.2370-80. USD-CHF remained supported above 0.9050 through the session, coming up just short of 0.9100. We look for the cross to remain at levels above the SNB's worry zone, though the ECB meeting on Thursday hold some risk. While the Bank is not expected to do much of anything, further dovish sounds may weigh on the euro.

    [USD, CAD]
    USD-CAD extinguished 1.0700 barrier options following the narrowed U.S. trade deficit, taking the pairing to highs of 1.0718. More offers were seen at 1.0730, just under the December peak of 1.0737. Significant stops were seen forming from 1.0740, and were triggered after the weak Ivey PMI outcome. USD-CAD was off to the races higher, touching 1.0762 from near 1.0715. The pairing posted fresh multi-year highs, and will likely next target barrier options at 1.0800.

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