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By XE Market Analysis January 31, 2014 3:11 pm
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    XE Market Analysis: Asia - Jan 31, 2014

    The dollar moved higher versus the euro in morning trade, despite mixed U.S. data readings, and melting down stocks. Softer EU inflation data prompted ECB rate cut talks (as soon as next week), which resulted in EUR-USD falling from session highs over 1.3570 to lows of 1.3480. USD-JPY was in a holding pattern, and managed to stay just over 102.00 through the session, but for a brief dip to 101.95. USD-CAD romped up to multi year highs near 1.1225, though an over-extending market of longs, resulted in over 120 points of profit taking into the weekend. Cable was firm over 1.6450 through the morning, but gave way to lows near 1.6425, as Wall Street recovered a chunk of early losses. Between Fed tapering, poor risk appetite, and emerging market concerns, volatility may be with us for some time in the FX market.

    [EUR, USD]
    EUR-USD slipped back in the aftermath of the cooler inflation data into the N.Y. open, basing under 1.3520, before spiking back up over 1.3570 as U.S. equity futures melted down. From there however, heightened expectations for an ECB rate cut next week following the softer EU CPI resulted in a slow and steady decline to 1.3480 lows, levels not seen since November 22.

    [USD, JPY]
    USD-JPY traded a very narrow range through the N.Y. session, after falling in the aftermath of higher Japan inflation, and better data generally. The pairing was mostly inside a 102.15-35 trading band, dipping briefly under 102.00 and peaking at 102.41. Uncertainty in emerging markets should generally keep the yen on a firmer footing for now.

    [GBP, USD]
    Cable was relatively quiet in N.Y. trade on Friday, ranging between 1.6485 and 1.6425. Month-end conditions kept trade fairly subdued for this pairing, though cable did generally take EUR-USD's lead. Next week, U.K. PMI's will be of interest, as will industrial production ad trade data. later in the week.

    [USD, CHF]
    EUR-CHF slid lower into the U.S. open on Friday, as safe-haven CHF buying returned on the back of diving stock markets, and thin and jittery month-end dealings. The cross fell back to near lows of the year at 1.2210 from London highs near 1.2245. Traders were hesitant to push under 1.2200, as the SNB will be paying close attention. As it turned out however, later in the session, Wall Street recovered the bulk of its early losses, taking the cross back over 1.2220, and USD-CHF over 0.9060.

    [USD, CAD]
    USD-CAD ran though stops over 1.1200, extinguishing barrier options at the figure in the process, before running up to 1.1234 highs. The move came after in-line Canadian GDP data, along with some mixed U.S. numbers. With the market well-short of CAD into week and month-end, the rally quickly ran out of steam, as profit taking set in. The pairing slid back sharply to 1.1088 in early afternoon trade, with the move apparently helped by talk that a U.S. environmental report on the proposed Keystone pipeline could give positive guidance for the project to go through.

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