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By XE Market Analysis July 2, 2014 11:24 am
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    XE Market Analysis: Asia - Jul 02, 2014

    The dollar recovered some of the recently lost ground against the euro and sterling on back of the June U.S. ADP jobs report, which surged 281k in May, much better than expected. Subsequently released soft factories data left the greenback largely uninfluenced, aside from a modest dip, and the major currency pairings settled ahead of tomorrow's slate of risk events, which include the June ECB meeting, the June Eurozone services and composite PMI figures, and the U.S. June payrolls report. Fed chief Yellen spoke today, but this was a non-market over as she mostly stuck to macro-prudential policies and oversight rather than monetary policy. USD-JPY logged a five-day high of 101.78 in the wake of the ADP data, while Cable breached London AM lows as the pair retreats from six-year highs that were seen following a forecast-beating construction PMI outcome in the U.K.. EUR-USD tested yesterday's low at 1.3640, but failed to breach it.

    [EUR, USD]
    EUR-USD downside stalled at the 1.3640-50 support zone, which is encompasses Monday's low and a series of daily highs that were seen before the early-week break higher. A cluster of sell-stop orders are reportedly sitting under 1.3635-30, while the technically minded will be looking for a sub-1.3640 close today to help confirm that Monday's move above of the 200-day moving average at 1.3675 was false break. Participants are presently waiting on Yellen's speech, which starts at the top of the hour.

    [USD, JPY]
    USD-JPY paused after running to a five-day peak of 101.74 in the wake of the dollar-supportive ADP data. Japanese accounts are said to have been yen sellers over few days, reportedly investors making yield-seeking investments abroad. USD-JPY resistance is pegged at 101.87 (Jun-26 high) and 101.95-97, which marks the near conjunction of the 20- and 50-day moving averages. Bigger picture, USD-JPY remains entrenched amid a broad sideways range, roughly contained within 100.00-105.00, which has been in place since early January. This stasis may persist for some time yet, though technical analysts will be marking this as a potential topping formation after the steep rally from levels around 75.0 that was seen during the second part of last year.

    [GBP, USD]
    We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. The BoE's stance has been backed-up by a solid manufacturing and construction PMI reports for June, and tomorrow's services PMI is expected to follow suit. BoE's Bean said over the weekend that market expectations of a rise in interest rates at the turn of the year are "reasonable." A big-picture Fibonacci retracement level at 1.7330, which is a 50% retracement level of the 2007 to 2009 decline, provides bulls with a target. Our EUR-GBP target is provided by the major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF breached 1.2150 this week and extended to a 1.2133 three-and-a-half month low, as the situations in Iraq and Ukraine continues to underpin the Swiss currency's safe-haven premium. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels, so far remaining unchallenged. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD logged a fresh six-month low at 1.0628. This makes it the fifth consecutive lower low on the daily chart. The pair breached below the 200-day moving average at 1.0783 early last week and has been trending lower since. The move reflects a broad dollar-bloc bid that was initially sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies as investors adjust a more optimistic world outlook. The BoC is also under pressure to reconsider its dovish policy stance. Resistance is pegged at 1.6996 (Friday's high) and 1.0700. Former congestion around 1.0580-1.0600 is support.

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