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By XE Market Analysis November 21, 2013 1:25 pm
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    XE Market Analysis: Asia - Nov 21, 2013

    The dollar traded in a mixed fashion in N.Y. on Thursday, moving lower versus the European major currencies, while firming against the yen and dollar bloc. EUR-USD found a footing on talk from ECB Draghi, who downplayed a negative deposit rate, the news which had weighed the euro down on Wednesday. The pairing managed 1.3478 highs after popping from 1.3430 into the N.Y. open. Sterling outperformed on a better CBI industrial trends survey. Better risk appetite helped USD-JPY trade over 101.00. U.S. economic releases were generally USD supportive, with jobless claims falling, and PPI on the benign side. The Philly Fed index missed expectations however, but had marginal impact on the greenback.

    [EUR, USD]
    EUR-USD forecasts for 1.3295 are filtered through after yesterday's negative deposit rate talk and the latest French PMI weakness. The 1.3295 level is the low that followed the ECB's 25 bp cut. However, it did not stay lower for very long as corporate flows, sovereign and commercial activity accelerated. Since the European session got underway there was an early test on 1.3400, which met very good support on dips, leaving the pair largely unchanged intra-day around 1.3440 into the N.Y. open. Draghi reported nothing new on negative deposit rate since last meeting. The comments came after yesterday's report that the ECB is considering a mini-cut in the deposit rate to -0.1% should further measures be needed. This propelled EUR-USD over 1.3475, and it managed to hold 1.3440 for the remainder of the session. We suspect we haven't heard the last of negative depo rates, though for now, the subject appears to have run its course for now.

    [USD, JPY]
    USD-JPY extinguished 101.00 option barriers on further dollar gains. Follow through was contained however, despite the $1 bln worth of plain vanilla 101.00 strikes rolled-off. There are now a build up of bids higher up from 100.70 to 100.40, which should limit any correction. The break of 101.00 lifts USD-JPY into new territory and large exotic structures between 101.00 and 103.00 for mid-December should underpin topside hedging. and reinforce dollar demand. Meanwhile, EUR-JPY also challenged 136.00 barriers, which held on the firm attempt higher, though setbacks are currently being limited in the 135.80s. Since EUR-USD fell in Europe it has been supported for the most part and this has also helped EUR-JPY to a degree.

    [GBP, USD]
    Cable was boosted by strong U.K. data. A very impressive U.K. CBI monthly trends survey carried Cable back to 1.6140 and came close to retest yesterday's top near 1.6180. Since the start of the week Cable traders have noted positioning for further upside. EUR-GBP is trying to carve out a recovery with EUR-USD, though rate dynamics in the U.K. and the Eurozone may make this a fruitless trade and there are proprietary accounts that seem to agree with this view amid reports of funds fading the rally. Cable upside momentum could stall ahead of the N.Y. options cut over 1.6140 due to option exposure at 1.6145 and 1.6200, though we anticipate further dip buying.

    [USD, CHF]
    EUR-CHF drifted into the 1.2310-30 area as EUR-USD traded heavily. USD-CHF shot over 0.9190 from near 0.9100, in concert with EUR-USD's dive, and following the FOMC minutes. From there however, the CHF stabilized, following EUR-USD's move back over 1.3470. 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 posted modest gains through the morning session, making it up to 1.0494 after opening near 1.0460. Talk of standing offers at 1.0500 was heard, with stops at 1.0520, while rumored defense of 1.0500 barriers made the rounds. Oil prices, and risk levels were CAD supportive, though USD-CAD did manage 1.0517 highs before easing back some on profit taking. CAD trade is likely to quiet overnight, as traders look to Canada's October CPI release on Friday.

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