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By XE Market Analysis November 20, 2013 2:33 pm
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    XE Market Analysis: Asia - Nov 20, 2013

    The dollar got a boost from an ECB news report in N.Y. on Wednesday, taking EUR-USD from near 1.3550 to lows near 1.3435. Intra-day accounts got caught long of EUR-USD after ECB is said to weigh a -0.1% deposit rate if more easing is needed. Elsewhere, the greenback was dragged higher versus the pound, yen and Swiss franc as well. Looking ahead, the combination of improved chances for Fed taper sooner than later, along with a very dovish ECB, should keep EUR-USD heavy for the time being. The dollar edged higher after the FOMC minutes release, which showed officials looked for tapering in the coming months or at the next few meetings amid expectations for better data. EUR-USD touched session lows of 1.3415 from 1.3445, as USD-JPY neared 100.25 from 100.05. Prospects for December taper had been on the rise this week, supporting the USD to a degree, and the minutes would seem to leave some room for a move in December. On the data front, tame CPI and firmer retail sales provided some support to the USD, which helped equities and Treasury yields modestly higher. Existing home sales missed the mark slightly, though had little impact on trade.

    [EUR, USD]
    Intra-day accounts got caught long of EUR-USD after ECB is said to weigh a -0.1% depo rate if more easing is needed. A Bloomberg piece citing two unnamed source initially sent the EUR from 1.3540 to 1.3475 lows. The EUR did not immediately travel too far on the downside as good bids had surfaced around these levels since the start of the week. EUR has been a tricky pair to trade this week. Persistent topside moves have met fund names and option flows, while on the downside corporate hedging, repatriation talk and Fed policy conjecture have competed with the ECB's renewed dovishness. EUR-USD did stay down after the renewed ECB threat for negative deposit rates, with the pairing finding tentative support into the 1.3450 level before edging to 1.3415 lows after the FOMC minutes. The euro had looked a little silly over 1.3500 the past day or two, as Fed tapering appears to be closer to reality now, and as the ECB remains seriously dovish.

    [USD, JPY]
    USD-JPY benefited on GPIF panel recommendations that called for a rise in the foreign asset ratio. USD-JPY jumped from 99.90 to 100.15 on the headlines, but has since headed back to the 99.90 region amid option related selling. There are outstanding option strikes around 100.40-50, though the larger interest is near 99.50 in excess of USD 3 bln and should reinforce the current consolidation pattern in USD-JPY. The pairing found support under 99.80 in N.Y. trade, and was dragged to highs near 100.15 on general USD strength.

    [GBP, USD]
    Cable extended session gains, moving through offers at 1.6170. The injection of liquidity on the Cable downside was a symptom of U.S. CPI data rather than any fresh GBP flows. Cable longs are primed for a 1.6200 test and an eventual move on previous trend highs around 1.6250-60, where it topped out on October-1 and October-22. In the meantime though, EUR-USD softness weighed on cable in afternoon dealings, taking it back to 1.6120.

    [USD, CHF]
    EUR-CHF drifted into the 1.2310-30 area as EUR-USD was unable to sustain overnight gains. USD-CHF shot over 0.9190 from opening levels near 0.9100, inconcert with EUR-USD's dive, and later, following the FOMC minutes. For the most part, activity in the swissy has been uneventful since the SNB warned that it was digesting the impact from the recent ECB rate cut. This has been enough to deter heavier demand for the CHF and it looks like this theme will continue in the near-term.

    [USD, CAD]
    USD-CAD eased marginally on the back of better U.S. retail sales, though overall managed a range of just 1.0438 to 1.0455. Bids were reportedly layered from 1.0450 down to 1.0430, which provide support, while offers from1.0480 discouraged buying overnight, limiting gains to just over 1.0470. Bigger picture, USD-CAD remains a range trade, and could continue to be influenced by Fed taper expectations, and the incoming U.S. data.

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