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By XE Market Analysis July 26, 2013 2:50 pm
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    XE Market Analysis: Asia - Jul 26, 2013

    The dollar stayed under pressure in N.Y. dealings on Friday, as the market unwound risk into the weekend. EUR-USD traded near 1.3300, though solid offers at the figure contained the upside. USD-JPY moved briefly under 98.00, as USD-CHF moved under 0.9300. The only data release was the final Michigan sentiment index, which improved slightly, though was largely disregarded by the markets. Equities and commodities were lower, and focus now turns to next week, where the FOMC, ECB meetings will highlight, along with the July U.S. employment report next Friday.

    [EUR, USD]
    EUR-USD threatened 1.3300 and reached a 1.3294 top in N.Y. before fading. The pairing reacted similarly in Europe earlier. Offers are heavy from 1.3300 related to outstanding options and real money offers. The latest Hilsenrath article weighed on the dollar tone, but the U.S. is still more advanced in its policy cycle than the Eurozone and in the coming sessions hedging may increase. Next week, central bank policy meetings from the U.S. and the ECB are in focus. Note, the ECB look less likely to ease after a pick up in Eurozone data, which has seen a re-pricing of the rate outlook via money markets and a supportive lead for the EUR, backed up by positive technical indicators.

    [USD, JPY]
    USD-JPY dropped with Nikkei futures, leaving it at the bottom of the monthly range. One U.S. account successfully filled in stops on the way to 97.96 lows. Momentum account and system fund sell stops were widely reported in the European morning, but there was no follow through earlier after USD-JPY dealt at 98.48 in the European morning and then 98.45 after the N.Y. open. Natural buyers should emerge under 98.00. In Asia, sources said Asian investors were reducing longs in the Nikkei via both the cash and futures market. The futures market broken the 14k level after the N.Y. open and technically is looking weak and there is a rising risk of a deeper retracement.

    [GBP, USD]
    Cable experienced profit taking as book cleaning activity went through ahead of the weekend. It made several moves across 1.5400 since it broke to 1.5435 at Thursday's N.Y. close. The pairing touched 1.5355 lows in N.Y. before recovering to 1.5390 into the close. The long-term speculative market is still running net short positions and next week could be interesting if Cable moves towards the pain barrier at 1.5500, where we would expect long-term accounts to throw in the towel. Since the BoE introduced forward policy guidance Cable traded down to 1.4814 and then soared as Bernanke pulled the rug from under the BoE and ECB with his own reminder on policy.

    [USD, CHF]
    CHF traded on a firmer footing as the European majors consolidated overnight gains against the USD. The dollar pairing initially experienced a congestion of two-way flows either side of 0.9300, but then edged out 0.9265 lows in N.Y. The move out of risky positions saw EUR-CHF ebb to 1.2315 lows after it posted a weak close under 1.2350 on Thursday. This indicates the potential for further losses, though USD-CHF is trading around levels where both corporate and real money demand could provide a modicum of support.

    [USD, CAD]
    USD-CAD again held 1.0250 in late North American trade on Thursday, before recovering toward 1.0290 in Asia. Since then, the pairing maintained a 1.0260-85 trading band, and was at the top of that range in early dealings. Gold, oil and equities were all under water, which will supported the pairing in morning trade. USD-CAD moved briefly over 1.0300, as risk appetite slid into the weekend. Offers were in place at 1.0300-10, with more noted at 1.0330-50, so upside was contained into the London close.

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