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By XE Market Analysis November 11, 2014 1:22 pm
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    XE Market Analysis: Asia - Nov 11, 2014

    The dollar drifted lower in quiet trade, more than giving back gains seen during the Asia and European AM sessions. EUR-USD recovered to the mid-1.24s, leaving a two-day low at 1.2394. The euro was unperturbed was remarks from ECB's Mersch, who said the central bank will be ready to buy ABS next week. There is also growing conviction that the central bank will at least have to widen the scope of asset purchases to include corporate bonds if it wants to expand its balance sheet towards the EUR 3 trillion mark. USD-JPY settled to around the mid-to-upper 115s after clocking a fresh six-year high at 116.10. The dollar rally had been sparked by remarks of Fed member Fischer in an Handelsblatt interview today, who said that rates could rise in the U.S. before summer 2015, which is the prevailing market view with respect to the timing of the first tightening. EUR-CHF edged out a fresh 26-month low at 1.2021 in what is best described as cautious trade given the heightened risk of SNB intervention with the franc's 1.2000 cap in close proximity.

    [EUR, USD]
    EUR-USD recovered to the mid-1.24s, leaving a two-day low at 1.2394. The euro was unperturbed was remarks from ECB's Mersch, who said the central bank will be ready to buy ABS next week. There is also growing conviction that the central bank will at least have to widen the scope of asset purchases to include corporate bonds if it wants to expand its balance sheet towards the EUR 3 trillion mark. We remain bearish in the bigger pictureon the basis of our anticipation for higher growth in the U.S. relative to the Eurozone over the next six months, looking for an eventual move on the Oct 2012 low at 1.2040. Nearer-term trend resistance is marked at 1.2357-60 and 1.2400.

    [USD, JPY]
    USD-JPY has punched to a new trend high of 116.10 so far. Buy stops were triggered around 115.55-65. The move comes after Japan's PM Abe said that the intended second sales tax hike will be delayed, according to government sources cited by Reuters. Our long-standing target at 115.00 was finally met last week, though we still think divergent economic and central bank policy paths between the U.S. and Japan will remain broadly supportive of USD-JPY.

    [GBP, USD]
    Cable has retreated back below 1.59 amid broad dollar strength. The pair logged a 13-month low at 1.5790 last Friday, which took out our target of 1.5854 (which was the November 2013 low). We anticipate more of the same as we see U.K.'s recovery pace will continue to ebb over the coming quarter due to the impact of economic stagnation across the Channel and de-acceleration in some key emerging markets. This will likely contrast to the situation Stateside. Resistance is at 1.5945-50, 1.6000 and 1.6022-28 (former highs), support at 1.5887-90 and 1.5824-25.

    [USD, CHF]
    EUR-CHF edged out a fresh 26-month low at 1.2021 in what is best described as cautious trade given the heightened risk of SNB intervention with the franc's 1.2000 cap in close proximity. The franc hasn't seen the south side of 1.2000, the SNB's cap, since it was implemented in Sept 2011. The central bank hasn't needed to intervene since 2012, and can be expected to be resolute in any new defence of 1.2000 after recently threatening negative interest rates if need be. Euro weakness and bouts of risk aversion have been weighing on EUR-CHF, while the approach of the so-call "gold initiative" referendum (aka "Save Our Swiss Gold") in Switzerland on Nov-30 is seen as potentially bearish for EUR-CHF. A 'yes' outcome would require the SNB to raise the percentage of gold reserves to 20% of the total from 8%, which SNB's Danthine argued "would severely constrain the SNB's room for manoeuvre in a future crisis."

    [USD, CAD]
    USD-CAD corrected to the 1.13s after making a new major-trend high at 1.1467 last Wednesday. Resistance is marked at 1.1370-71 and 1.1480-1.1500, support is at 1.1300. We still expect further greenback gains as the risk of continued soft oil prices will be a relative downer for the Canadian dollar.

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