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By XE Market Analysis November 13, 2013 2:37 pm
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    XE Market Analysis: Asia - Nov 13, 2013

    The dollar traded in a choppy fashion in N.Y. on Wednesday, though ultimately ended up lower overall, as position paring continued. EUR-USD fell on ECB comments, where the possibility of negative deposit rates remains, though the dip provided good opportunity for euro short covering. USD-JPY was up, then down, then up again, between 99.20 and 99.60, while sterling was not to be outdone, and rallied to 1.6050 ersus the greenback. There was nothing on the economic calendar to drive the market, though risk off on Wall Street, on the back of December Fed tapering fears, weighed on sentiment.

    [EUR, USD]
    EUR-USD fell back under 1.3420 from near 1.3455, apparently on the back of comments from the ECB's Praet, who said the Bank could adopt negative rates, or purchase assets from banks if needed. Sell stops were noted from 1.3405, and eventually tripped, as EUR-USD touched a low of 1.3390, with talk of short covering providing support under the figure. Intra day longs were taken out by the ECB's Praet comments earlier. EUR-USD later completed its round trip, making its way up to fresh intra day highs of 1.3470. Both longs and shorts appeared to get hurt this morning on the whippy price action, though sources put down the sharp rally to session highs, on large fund account short covering out of London, likely taking advantage of teh ECB inspired dip under 1.3400.

    [USD, JPY]
    USD-JPY held up well thorugh the session. A reversal in EUR-USD from just over 1.3450 back to 1.3400 gave USD-JPY a mild boost, though for the most part appetite in either direction was limited. Market participants are still running long positions in anticipation of a near-term test on 100, though some of these positions are starting to look stale. A stop hunt in EUR-JPY under 133.00 could begin to weigh. The cross toppled over from 133.75 to 133.30 after ECB's Praet talked up the options at the ECB's disposal. However, the comments did not really break any new ground, but they are limited broader EUR short covering. USD-JPY meanwhile, was stuck inside of 99.20-60 through the session.

    [GBP, USD]
    GBP pulled back from session highs in early N.Y., as follow through stalled. The kneejerk reaction over the BoE Inflation Report was positive, but BoE Carney removed ambiguity over the rate outlook in the accompanying press conference. Even though the BoE said that the unemployment threshold would reach 7% sooner than it originally forecast it does not mean that it will hike rates. Carney indicated it would be a time for review, but it could still leave policy unchanged and he also suggested that the BoE could even lower the threshold to 6.5% from 7.0%. Carney emphasised that forward guidance has removed an unnecessary debate on rate hikes and this has helped the recovery. The comments forced Cable from 1.6000 to the 1.5950 region and EUR-GBP moved back over 0.8400. From there, cable tested 1.6050 as the dollar overall faltered.

    [USD, CHF]
    CHF remained narrowly mixed amid the recent contrasting flows via EUR and USD. USD-CHF is marking time near 0.9170 after it pulled back from last week's 0.9250 peak to 0.9155-60 on Tuesday. The impact on EUR-CHF was muted as EUR-USD moved higher. The dollar is still expected to trade on the firmer side amid a rise in Fed taper expectations, though a period of sideways movement may influence in the near-term before trending higher again. The SNB indicated that it would monitor the impact from the ECB rate cut. However, so far EUR-CHF has been well supported by local names into 1.2300 and below, which will offer encouragement to the SNB.

    [USD, CAD]
    USD-CAD was well-behaved between 1.0480 and 1.0500 overnight, hemmed in by bids underneath and offers from 1.0510. The risk backdrop was mixed, with equities starting out lower in the U.S., and oil and gold prices firmer. In the bigger picture, despite the BoC's tightening bias gone, stronger U.S. economic growth should tend to underpin CAD strength over time. Near term though, order flow will determine USD-CAD direction, where currently, it appears the sellers over 1.0500 have the upper hand. The pairing indeed eased back to 1.0455 in afternoon trade.

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