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By XE Market Analysis July 7, 2014 2:30 pm
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    XE Market Analysis: Asia - Jul 07, 2014

    Stocks pulled back, and yields faded, along with the greenback in N.Y. trade on Monday. A lack of data had the market focused on the risk backdrop, which was not encouraging, and resulted in the dollar easing versus the yen and major European currencies. EUR-USD hovered just under 1.3600 through the morning before rallying marginally to 1.3609, while yield-sensitive USD-JPY drifted down toward 101.80 after failing to crack the 102 handle. The CAD perked up on better housing permits data, though USD-CAD rallied again after PMI data were much weaker than expectations.

    [EUR, USD]
    EUR-USD was tied to a 1.3591-1.3600 trading range through the N.Y. morning session. European investment fund backed offers were noted in place at the figure early in the session, with light buy-stops seen from 1.3620. There was little appetite to test London lows near 1.3575, with a band of bids at 1.3580-70 likely thwarting selling interest. The euro later peaked at 1.3609 in lethargic afternoon dealings.

    [USD, JPY]
    USD-JPY eased to intra day lows of 101.82 in early trade, after breaking the London base of 101.90. The move came as equity futures and Treasury yields continued to fade, though activity was fairly subdued overall. Last Thursday's 101.76 low provided initial support, with the pairing later basing at 101.79, while offers are seen building into 102.00.

    [GBP, USD]
    Sterling was softer on corporate demand for EUR-GBP in London, which rallied nearly 30 pips from the new 20-month low at 0.7916. Cable was not ruffled too much, drifting fractionally low toward 1.7110 in early n.Y. trade, and the pair still looks poised for a test of last week's six-year highs at 1.7179-80. We remain sterling bullish. This week's U.K. production data should reaffirm the strong fundamental credentials of the pound, and be consistent with the BoE having left the hawkish starting gates ahead of the Fed and ECB.

    [USD, CHF]
    EUR-CHF breached 1.2150 last 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 approached Friday's 1.0630 low following the stronger building permits data, after peaking at 1.0649 in early north American trade. The pairing recovered marginally, as a layer of bids was noted ahead of the 1.0621, six month low posted on Thursday. The pairing later shot up over 1.0675 after the much weaker than expected Ivey PMI data, where the seasonally adjusted print came in solidly in contractionary territory for the second month running. The next resistance area is at last Thursday's 1.0675-80 region, with large-ish stops now reported at 1.0700.

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