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By XE Market Analysis November 25, 2013 2:13 pm
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    XE Market Analysis: Asia - Nov 25, 2013

    The dollar firmed up modestly in N.Y. dealings on Monday, though remained inside a narrow range versus most major currencies. EUR-USD found support under 1.3500, while the 102.00 mark for USD-JPY remained elusive. The economic calendar was light, with a softer pending home sales report offset by a strong Markit composite PMI outcome. With hedge funds traditionally closing their books at the end of November, we may see further paring of short dollar positions into the Thanksgiving holiday on Thursday. In addition, a very dovish ECB could be on the verge of sinking the euro, while a better U.S. economic outlook could keep the yen under pressure.

    [EUR, USD]
    EUR-USD drifted lower in London and into the N.Y. session, as offers increased over 1.3550, which has been the case on recent EUR rallies. Option maturities from 1.3520 down to 1.3450 should continue to slow price action. The pairing ran into buyers under teh 1.3500 mark through the N.Y. session, and rebounded modestly to near 1.3520 into the close. There is conjecture that EUR could be supported into year-end on commercial flows, though into the U.S. Thanksgiving holiday there is potential for dollar demand on fund book cleaning. Market participants are digesting more dovish rhetoric from ECB officials on the weekend, though it had very limited influences on price action like recent sessions.

    [USD, JPY]
    USD-JPY traded close to 101.75, where large expiries are due to roll off over the next few sessions. There are smaller strikes at 102.00 as well, but the big focus for option traders is 101.75 on Thursday ahead of the U.S. holiday. However, the underlying tone is skewed to a test of the double top near 102.50 from the end of May. The market is well hedged for further topside moves, but is now underweight on the downside after 101.50 knockouts were breached in Asia and reduced a lot of gamma exposure from the market. USD-JPY struggled on the upside all session. Exporter offers are in place from 102.00, and given the market being seen as well long of dollars, a small profit taking shakeout may be in the cards into Thursday's U.S. holiday.

    [GBP, USD]
    Cable edged out intra-day lows at 1.6134 amid U.S. hedge fund selling. Some of the flows are thought to be cross related, with reports of EUR-GBP support and GBP-AUD supply go through. A thin data schedule ahead of the U.S. Thanksgiving holiday could see an increase in U.S. hedge fund activity as recent positions are cut back as funds close their books ahead of the year-end slow down. GBP is still a good long-term bet, but Cable has experienced difficultly in clearing 1.6260 since early October and the market lacks the liquidity today to overcome decent size offers higher up. GBP traders are looking to Wednesday when the second estimate of Q3 GDP is due for release.

    [USD, CHF]
    CHF was a touch easier intra-day, taking EUR-CHF back over 1.2325 and USD-CHF back over 0.9130. Ranges remained narrow, but local names saw last Friday's EUR-CHF move to two-week lows of 1.2285 as a buying opportunity, leaving 1.2280 stops intact. CHF-JPY, which has been buoyant of late, pulled back from a new 23-year high of 112.13 in early Europe to trade back at 111.65 as profit taking went through. Switzerland voted on Sunday on a proposal that would have limited executive pay to 12 times that of the lowest paid. 65.3% voted against the plan, which was widely expected.

    [USD, CAD]
    USD-CAD peaked at trend highs of 1.0583, just shy of the July 8 peak of 1.0585. A move over 1.0609 would take the pairing to better than 2 year highs, where 1.0657 was posted in October of 2011. In the meantime however, defense of 1.0600 barrier options is expected, though stops are noted at 1.0610. Canada's cool-ish CPI data release on Friday continued to weigh on the CAD, while weaker oil prices in the wake of the Iran deal has kept support under USD-CAD. The pairing later eased toward 1.0540, though edged back over 1.0560 in afternoon trade.

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