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By XE Market Analysis July 16, 2013 2:40 pm
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    XE Market Analysis: Asia - Jul 16, 2013

    The dollar traded broadly lower in N.Y. on Tuesday, with slightly hotter headline CPI, and in-line industrial production not having much impact on the greenback. Focus was squarely on position adjustments in front of Bernanke's testimony on Wednesday, which entailed selling back dollars against every major currency. EUR-USD traded over 1.3150 after finding support around 1.3100, while USD-JPY traded under 99.25, after running into sellers over 99.50. USD-CAD was heavy ahead of the BoC announcement on Wednesday, touching 1.0375, as cable rallied out of 1.5050 to 1.5230. Bernanke's prepared testimony will be released at 8:30 EDT tomorrow, and until then, we see the dollar sideways to a touch lower still.

    [EUR, USD]
    EUR-USD ran into decent buying interest on its brief foray under 1.3100 following the CPI data, and quickly moved to intra day highs over 1.3135. Some resistance was expected into the June 11 high near 1.3150, though stops are said to be located from 1.3160. The dollar got a minor bump higher following the in-line production data, though remained rangebound overall. EUR-USD continued to find support around 1.3100,and later posted highs of 1.3155.

    [USD, JPY]
    USD-JPY got a lift over the N.Y. options cut, where good size 99.50-60 expiries rolled off. Follow through was disappointing. After rally from 99.45 to 99.65 interest has narrowed around 99.50. More range bound action can be expected into tomorrow's session. There are no fresh positions being put on. There are two-way orders on either side of the range from Asian accounts, while offshore are jobbing inside the range. Decent size Japanese orders are still propping up the downside into the top of the Ichimoku cloud around 99.00. Exporters used the overnight move above 100.00 to hedge and this is restricting further gains amid good resistance layered into the 100.50 area.

    [GBP, USD]
    Cable fell briefly on CPI data. The U.K. CPI reading came in at 2.9% y/y, which was a notch lower than the 3% forecast, though up from 2.7% previously and still the highest reading since April 2012. Cable pulled back from 1.5145 in early Europe and traded into 1.5080 ahead of the reading. However, a subsequent push back into 1.5125 met a wave of sell-interest to force a move into 1.5045 over the release. Thereafter, persistent dollar supply carried it back over the 1.5125 level. Dollar selling was a widespread theme in N.Y. trade, as positions were pared into Bernanke.

    [USD, CHF]
    CHF firmed up against the EUR and the USD. Most of the action during the European morning was dominated by position reduction by dollar longs ahead of Bernanke. Nerves are running high, bearing in mind last week's outsized moves over the FOMC minutes and the subsequent speech from Bernanke. Dollar long liquidation triggered a downturn from just ahead of 0.9500 to the 0.9420 region as sell stops gave way through 0.9450. EUR-CHF pulled back from the 1.2400-05 region to 1.2365 as short term funds were reluctant to put on leverage trades amid today's defensive tone across equity markets.

    [USD, CAD]
    USD-CAD traded to intra day lows under 1.0410 into the North American open, after finding resistance under 1.0450 through the overnight session. The modest move down came as the greenback was more broadly pressured, and the soft USD tone is likely to prevail into Bernanke's testimony on Wednesday. May Canadian manufacturing data came in near expectations, though with the BoC policy announcement due Wednesday, position squaring kept USD-CAD heavy through the session. USD-CAD dipped under 1.0400 to intra day lows of 1.0375, where there was talk of standing buyers at 1.0380-70, which about matched Monday's low.

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