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By XE Market Analysis January 8, 2014 3:05 pm
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    XE Market Analysis: Asia - Jan 08, 2014

    The dollar firmed up following the stronger December ADP employment survey, sending EUR-USD to recent lows under 1.3560, and USD-JPY back over 105.00. The stronger data spooked the equity and Treasury markets a bit, with the better data bringing fears of a quicker Fed taper back to the surface. Later, the greenback moved to session highs following the FOMC minutes, perhaps on elevated yields, though with the minutes revealing nothing groundbreaking, reaction was minimal. Stocks ended mixed, while 10-year yields touched 3% again. We expect trade to remain subdued to a degree overnight, into Thursday's ECB meeting, though no shifts in policy are expected.

    [EUR, USD]
    EUR-USD fell to 1.3568 lows from near 1.3595 after the ADP jobs data, though found support from Asian sovereign bidding interest from there. The subsequent rally was capped under 1.3620, and the pairing again gave back the 1.36 handle. As was the case in December with the 1.3800 level, the euro now looks to be having trouble maintaining 1.3600. The euro touched session lows under 1.3555 following the FOMC minutes, though into tomorrow's ECB meeting, we look for EUR-USD to maintain recent trading bands. Looking ahead, improving U.S. data, along with at best, an unchanged ECB dovish stance, should keep pressure on the euro for now.

    [USD, JPY]
    USD-JPY spiked up to 105.00 from 104.70 after the jobs data, though quickly reverted lower on reported Japanese and option account selling. The pairing stabilized into 104.70, before making another attempt to hold 105 following the FOMC minutes. This foray failed as well, with the dollar closing near 104.85. We expect the yen to weaken further in the coming days, though risk to this view would be a sustained bout of risk aversion in global markets, which some think possible giving richly price stock markets and tightening courses of the U.S. and China.

    [GBP, USD]
    Sterling outperformed, rising to a five-day high versus the USD, a six-day high against the JPY, and five-week peak on the EUR. This follows the BoE's quarterly Credit Conditions Survey that found lenders are planning a "significant" increase in both mortgage and business lending in Q1. The intended surge in business lending will have been tonic for U.K. policymakers, who have been fretting about low business lending as this has been a missing link in the economic recovery story so far. Cable's Jan-3 high of 1.6474 can be marked as a resistance level, ahead of 1.6500. Support is at 1.6435-1.6450.

    [USD, CHF]
    EUR-CHF firmed up to 1.2395 from 1.2370 in London morning trade, though had reverted to 1.2385 into the N.Y. open. EUR-USD underperformance later resulted in a softer cross, USD-CHF remained supported above 0.9080 through the session, touching 0.9127 highs after the U.S. jobs data. 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 took out the 1.08 level in London, and peaked at 1.0828 before easing back under the figure into the North American open. Offers were seen in place at 1.0830-50 now, temporarily at least, halted the pairing's sharp gains seen this week. The USD moved to highs of 1.0827 following the U.S. jobs data. Bids are now in place from 1.0740, just above the previous trend high of 1.0737. The next upside target over 1.0850 comes in at 1.0900, though this will likely remain out of reach into Friday's twin U.S. and Canadian employment reports.

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