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By XE Market Analysis July 3, 2013 12:41 pm
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    XE Market Analysis: Asia - Jul 03, 2013

    The dollar was softer in a holiday shortened session for many, losing ground despite the geopolitical backdrop. EUR-USD moved up over 1.3030 from 1.2950, largely as pre-ECB short covering stepped in. U.S. desks, who will be largely absent on Thursday due to Independence Day, were active euro buyers through the morning. USD-JPY meanwhile, dipped to 99.25, though managed to reclaim the 100 handle ahead of the close. On the data front, weekly jobless claims were near expectations, though the May trade deficit blew out due to a drop in exports, and stronger imports. Wall Street was weak early on, though managed to recover into the early close.

    [EUR, USD]
    EUR-USD was off to the races to the upside, blowing through noted offers at 1.2990-1.3000, and stops above, on its way to highs over 1.3030. The 1.2080 level had capped in Asia and London, and the move above saw weak shorts run for cover. Tuesday's N.Y. highs near 1.3040 will likely provide interim resistance, but a break there will bring yesterday's London high near 1.3080 into focus. We look for relative calm into Thursday's ECB announcement though, and narrow ranges should prevail, barring fresh geopolitical events.

    [USD, JPY]
    USD-JPY struggled to push higher since it lost the Y100 level during the European morning. London sources tipped offers at 99.80 in excess of USD 500 mln that is keeping bias with the downside. JPY gains drove USD-JPY to 99.60 during the European morning and triggered a bout of model fund unwinding at the N.Y. open, which forced 99.25 lows. However, more than one sovereign name was tipped as a buyer at the lows. Today's heavy deleveraging did some damage to the recent uptrend and stale longs are more likely to sell into strength now.

    [GBP, USD]
    GBP consolidated close to intra-day highs. Cable is trading around 1.5275, but has met good offers since it made outsized gains in the wake of U.K. service sector data strength. EUR-GBP revisited the 0.8480 area, where it ran into very good bids last Wednesday. Corporate support should keep a floor in place ahead of tomorrow's ECB policy outcome. For Cable, it may be reaching the top of the short term range after pushing against the underlying dollar trend for most of the session. U.S. accounts are likely to stick with dollar longs into tomorrow's U.S. Independence Day holiday.

    [USD, CHF]
    USD-CHF faltered in unison with the EUR-USD spike up, trading under 0.9445 after finding N.Y. sellers into 0.9500 earlier. Rumors of further SNB measures to defend the EUR-CHF floor have made the rounds, though sources have been cited as "dubious". The CHF has found some safe haven support on the back of Egypt and Portugal problems, though EUR-CHF remains safely above the line in the sand.

    [USD, CAD]
    USD-CAD was rangebound overnight, moving inside about a 1.0520-60 band, and opening the North American session right in the middle at 1.0540. USD-CAD moved up to intra day highs near 1.0565 from lows under 1.0530 since the trade data, though activity was light overall. Offers were reportedly lined up from 1.0580 to 1.0600, with large stops seen in place over the figure. Fund backed selling remained in place into 1.0600, while barrier option defense is likely as well. Positions were kept reined in front of the ECB meeting tomorrow, and the twin U.S./Canada employment reports on Friday.

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