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By XE Market Analysis November 5, 2013 1:41 pm
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    XE Market Analysis: Asia - Nov 05, 2013

    The dollar firmed up versus most major currencies in N.Y. trade on Tuesday, as EU growth projections were trimmed, and EU PPI softened further. In addition, U.S. non manufacturing ISM printed better than expected levels, Wall Street took Europe's losing lead early on, though managed to recover later in the session on the back of the improved ISM. Treasury yields bounced early in the session, putting another brace under the greenback. EUR-USD traded from 1.3500 to lows of 1.3450 before bouncing modestly, while USD-JPY traded over 98.60 from lows near 98.25.

    [EUR, USD]
    EUR-USD dipped to 1.3465 in early N.Y. trade, though buyers were seen waiting in the wings into the 1.3450-40 region. Monday's 1.3442 base provided initial support, but stops will likely be a factor under 1.3440. A decisive break down from there could well see 1.3380 targeted near term. The pairing did manage 1.3445 lows in the aftermath of the better ISM report, though recovered over 1.3475 into the close. Selling on upticks should remain a feature into the ECB meeting on Thursday.

    [USD, JPY]
    USD-JPY has edged out highs at 98.40 after Japanese support underpinned from 98.20 overnight. Dollar demand has picked up a little since the N.Y. open. There aren't any major drivers, but there are still EUR short positions being built up ahead of Thursday's ECB meeting and this is guiding action out of N.Y. Some research desks have warned that the market may be over-positioned for an ECB rate cut this week, which is a risk for bearish bets. Any further EUR-JPY losses should run their course between 132.00 and 131.50. USD-JPY reacted later to better U.S. ISM data, which elevated Treasury yields. The pairing made it up to near 98.65 in afternoon trade.

    [GBP, USD]
    GBP is consolidating gains, with Cable trading comfortably at 1.6030 and EUR-GBP is marking time under 0.8400 after support gave way after the N.Y. open. The jump in U.K. services PMI was the catalyst for a shift in the rates market, as well FX. Cable has basically returned to the middle of the recent trading range, but today's action has negated the bearish overhang on the daily chart, which will encourage dip buying in the very short term. EUR-GBP looks likely to remain heavy into the ECB, yet could present a buying opportunity if 0.8350 or below deals over the ECB decision, as we think the ECB could disappoint rate doves for at least one more month.

    [USD, CHF]
    CHF dipped after weaker than expected Swiss CPI. It fell 0.3% y/y in October from -0.1% in September and this lifted EUR-CHF up from 1.2305 to 1.2315, while USD-CHF moved up from 0.9120 through 0.9130. N.Y. trade was uneventful, as USD-CHF inched up toward 0.9150, while the cross settled in just under 1.2300.

    [USD, CAD]
    USD-CAD was tied to a narrow trading band though the session, finding support at 1.0425, while running into offers at 1.0450. Supply may not be as heavy as it was last week when option barriers at 1.0500 influenced, along with real money demand for CAD. The downturn in risk assets has also added weight on the CAD tone, and it may threaten last week's peak just ahead of 1.0500 in the coming sessions.

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