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By XE Market Analysis July 17, 2017 1:57 pm
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    XE Market Analysis: Asia - Jul 17, 2017

    Aside from EUR-USD which was roughly flat through the N.Y. session on Monday, the dollar posted modest gains versus major currencies. The euro managed just a 1.1487 to 1.1462 trading band, failing to take out last week's 14-month high, though unable to press much lower into Thursday's ECB meeting. USD-JPY looked heavy in morning trade, but later was able to top 112.85 as Wall Street steadied in marginally positive territory. USD-CAD printed new 14-month lows of 1.12628, before succumbing to some short covering action. Cable meanwhile, stayed away from Friday's 10-month highs, fading into 1.3050 in light trade.

    [EUR, USD]
    EUR-USD was unable unable to crack last week's 14-month highs of 1.1489, topping at 1.1487 early, before pulling back into 1.1465. Focus shifts to Thursday's ECB meeting, where the Bank is likely to stick to the June script and try to calm tapering nerves. The drop in Eurozone HICP inflation to just 1.3% y/y in June, will strengthen the arguments of the doves, and a dovish slant from Draghi may put an end to the euro's recent gains.

    [USD, JPY]
    USD-JPY remained stuck under the 112.50 mark, printing intra day lows of 112.34. The risk backdrop was mixed early in the session, leaving buyers with cold feet, though despite lowered Fed rate hike expectations, interest rate differentials continue to favor the dollar over the yen. Support comes in at Friday's two-week low of 112.27, then at the 50-day moving average of 11.89. Later, as Wall Street steadied, the pairing broke through resistance at the 20-day MA, which currently sits at 112.65, on its way to 112.86 highs.

    [GBP, USD]
    Sterling settled a bit lower on Monday, after rallying last week. After a period of underperformance, the pound found respite amid secular weakening in the dollar and euro recently, though BoE policymaker remarks and UK data were mixed. Cable stayed away from the 10-month highs of 1.314 printed on Friday, eventially pulling back to lows near 1.3050.

    [USD, CHF]
    EUR-CHF rallied to new 11-month highs of 1.1073 in N.Y. on Friday, with gains coming on the back of a firmer EUR-USD. The cross remains over 2.0% up on levels prevailing in late June, having gained amid a broader bid in the euro following a batch of signals from ECB policymakers that have collectively affirmed that policy tapering is on the table. The policy shift will be welcome by Swiss policymakers after Switzerland's inflation dipped to just 0.2% y/y in June data, down from 0.5% in May and threatening a return of deflation.

    [USD, CAD]
    USD-CAD was down testing its overnight 14-month low of 1.2640 early on, bottoming at 1.2628. The impact from the BoC's rate hike last week has largely been priced into the pairing, though downside progress may continue, as the market to some extent, prices out another Fed rate hike this year. Firmer oil prices have kept a lid on the pairing as well, and further gains could bring USD-CAD's May, 2016 lows of 1.2461 into focus. In the meantime, a round of short covering saw the pairing bounce back over 1.2695.

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