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By XE Market Analysis July 30, 2013 1:38 pm
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    XE Market Analysis: Asia - Jul 30, 2013

    The dollar was generally firmer in N.Y. trade on Tuesday, though activity was again on the low side into Wednesday's U.S. GDP and ADP jobs data, and of course the FOMC announcement. EUR-USD traded down to 1.3235 lows after taking out option barriers at 1.3300, while USD-JPY reclaimed the 98.00 handle. USD-CAD once again found support ahead of 1.0250, later managing to test 1.0300, while AUD-USD posted two-week lows under 0.9045. Cable dipped under 1.5250, as USD-CHF retook 0.9300. On the economic front, May home prices rose a bit more than expected, while July consumer confidence slipped some. Neither had much impact on the markets, with focus now squarely on pre-risk event positioning.

    [EUR, USD]
    EUR-USD spiked up to 1.3302 from 1.3275 in early N.Y. trade, extinguishing 1.3300 option barriers in the process. Buyers stepped in on the move over 1.3280, which had capped the topside in London. Stops were a factor at the level, while a couple of Continental names were reportedly aggressive buyers over 1.3290. Sellers were in place over the figure, limiting follow though, and resulting in a modest pullback to 1.3290. Fresh intra day long were likely taken on over 1.3280, though these will be at risk on a move back under 1.3260. There was vague talk of a French downgrade making the rounds, which likely weighed some on the euro. EUR-USD later touched 1.3235 lows, as London names were sellers from 1.3260, and into the prior low of 1.3247. Bids returned under 1.3240 however, with short covering into the Europe close the driver.

    [USD, JPY]
    USD-JPY opened near 97.75, and rose steadily to 98.34 highs by mid-morning. The dollar's tone turned mostly positive after the open, but ongoing Japanese hedging related offers limited upside for this pairing. Bigger picture, USD-JPY has generally been meandering around familiar ranges, though some movement may be in the cards following upcoming central bank meetings, and key U.S. data.

    [GBP, USD]
    After trading quietly in London, cable pulled back to lows under 1.5230, after opening in N.Y. near 1.5325, levels last seen on July 19. Cable struggled over 1.5400 the past few session, and it appeared some position squaring was a driver into risk events this week. The BoE's Monetary Policy Meeting, concluding Thursday, highlights a fairly busy week in the U.K. We expect the BoE will leave the repo rate and QE total unchanged but to announce a formal adoption of forward policy guidance. In the event this may cause some sterling weakness, but such a move by the BoE wouldn't constitute a sea-change for markets, having been well anticipated already.

    [USD, CHF]
    USD-CHF remains in a bear trend, overall, but there is potential for a test of 0.9370, which marks the positive of the two-week trend resistance line. The Swiss calendar this week is highlighted by the KOF economic barometer, expected to improve to 1.21 (median same) after 1.16 in the previous month. This would signal improving economic momentum over the next six months. The SVME PMI survey for July is expected to show similar improvement, to 52.5 from 51.9. Although the fundamental outlook is improving we don't expect any softening in the SNB's commitment to maintain zero interest rates and its 1.20 limit cap in EUR-CHF.

    [USD, CAD]
    USD-CAD held above the key 1.0250 level again overnight, but managed highs of just 1.0290 in light trade. The pairing eased back under 1.0260 in early North American dealings, with the modest dip coming in concert with the general USD softer tone. As the greenback turned higher though, USD-CAD made its way back to test 1.0300, before turning sideways. Ahead of Wednesday's events, we look for USD-CAD to trade sideways.

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