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By XE Market Analysis June 21, 2018 2:51 pm
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    XE Market Analysis: Asia - Jun 21, 2018

    The dollar faded lower in N.Y. on Thursday, dented by a softer Philly Fed index. The DXY has topped at 11-month highs of 95.53 ahead of the open, and the weaker data appeared to have prompted some long-dollar position squaring. EUR-USD opened at 1.1540, later rallying to 1.1633 highs. USD-JPY peaked at 110.60 before falling to 10993 lows as risk-off conditions set in. USD-CAD printed a one-year high of 1.3334. Cable meanwhile, kept its post-BoE gains, topping at 1.3270, after three MPC members dissented, voting for a rate hike.

    [EUR, USD]
    EUR-USD bounced to 1.1633 highs into the London open, as short covering stepped in following the softer U.S. data. The pairing had fallen as low as 1.1508 in London morning trade, as Italian politics knocked the euro lower, with some Eurosceptic appointees being made by the newly installed populist government. Interest rate differentials continue to support the dollar, and we continue to favor selling EUR-USD into rallies.

    [USD, JPY]
    USD-JPY has been under some pressure since the 8:30 ET round of U.S. data, which included a weak Philly Fed index, dropping from 110.60 to session lows of 109.85, matching Wednesday's bottom, and representing the 20-day moving average. The risk-off backdrop along with lower Treasury yields have weighed.

    [GBP, USD]
    Cable rallied on the BoE announcement and minutes, gaining over a big figure in making a high of 1.3270, and up from the seven-month low that was printed during the London AM session, at 1.3102. An increased rank of three MPC members calling for a 25 bp hike in the repo rate boosted both UK yields and the pound. Although outnumbered to the tune of six, the dissenters have put a rate hike as soon as November back on the table. We expect Cable as more likely to form a range in the lower 1.30s than to commence a sustained rally.

    [USD, CHF]
    EUR-CHF printed a three-week low of 1.1479 into the N.Y. open, coinciding with EUR-USD drop to 1.1508 lows. The cross has been under pressure since the ECB's dovish guidance signal of last Thursday. EUR-CHF is now about midway levels of the range that's been seen over the last three weeks. The ECB's policy stance should ensure that the SNB remains resolutely committed to its ultra-accommodative monetary policy setting in an attempt to ward off, or at least limit, franc gains against the euro. Indeed, the NB's Jordan said that the bank sees no need to change policy at this point, while Maechler admitted that the end of the ECB's QE program presents a big challenge.

    [USD, CAD]
    USD-CAD has made yet another one-year high this morning, topping at 1.3334, and printing its eighth consecutive higher daily high. Softer U.S. data and firmed oil prices allowed the pairing to retreat back to 1.3287, though with NAFTA a major unknown, we expect USD-CAD dip buying to continue. The next resistance level comes at 1.3339, which was the June 22, 2017 peak.

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