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By XE Market Analysis October 23, 2013 2:30 pm
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    XE Market Analysis: Asia - Oct 23, 2013

    The dollar was mixed in N.Y. trade on Wednesday, posting fresh trend losses versus the euro, while bumping along the bottom of its range against the yen. EUR-USD managed 1.3794 highs, as USD-JPY hugged the 97.25 mark, as risk appetite reversed lower. A dovish BoC statement allowed USD-CAD to move toward the 1.0400 mark making highs last seen on October 11, over 1.0390. On the economic front, September import prices edged up, while the FHFA home price index firmed a touch.

    [EUR, USD]
    EUR-USD probed the topside several times, where outstanding 1.3800 options capped gains. EUR-USD has been one of the quietest currency pairs as varying cross-currents led to a session of consolidation. A reduction in risk appetite kept EUR-JPY and EUR-CHF on the defensive, which worked against EUR-USD's topside, though underlying dollar heaviness limited downside pressure. A heavy influence from Asian central banks was widely anticipated after increasing central bank activity in local currencies overnight. However, there were no large flows reported over the course of the session and it looks as if front running by intra-day accounts and a bullish technical backdrop ensured that the EUR-USD downside was limited to 1.3142 intra-day.

    [USD, JPY]
    USD-JPY stumbled along the bottom of the daily range. Light dollar demand lifted it into 97.50, where intra-day accounts faded the move. The pace of the overnight correction reinforced downside risk, particularly after semi-official support failed to materialise overnight. There were a few natural buyers under the 200-dma at 97.28 and ahead of October-9 lows at 97.12 during the European morning. USD-JPY is still inside the October trading range while 96.50 holds and this level is going to be more important for the longer-term outlook.

    [GBP, USD]
    GBP steadied after the European morning correction ran its course. Buyers resurfaced into 1.6120 after a deep drop from intra-day highs over 1.6250. Most of the action came before the BoE MPC minutes on fund liquidation, with GBP-CHF sales a standout trade. EUR-GBP offers into the 200-dma at 0.8534 has aided Cable into the lows and there is also a 1.6150 expiry that is reportedly exerting an influence as movement slowed midway in the N.Y. morning. Cable bias is still with the topside from a fundamental perspective, though we did note yesterday that the frequency of sell-orders started to pick up since the start of the week.

    [USD, CHF]
    CHF benefited on risk reduction. USD-CHF traded on the heavy side after it registered a negative close near 0.8950 on Tuesday after the dollar sank on the Fed policy outlook amid a disappointing September U.S. NFP reading, which came ahead of the October government shutdown. Previously, funds had been reluctant USD-CHF sellers due to the semi-official support, which fuelled a strong Swiss bid. However, the definitive dollar breakdown has kept the downside bias intact and also threatens to force EUR-CHF back on a 1.22 handle. USD-CHF found interim support ahead of 0.8900.

    [USD, CAD]
    USD-CAD surged over 1.0375 after the dovish BoC statement where the Bank dropped its mild tightening bias, eliminating the key line seen in September that "a gradual normalization of policy interest rates can also be expected.." The pairing blew through offers from 1.0350 on its way to the highs. The pairing remained under 1.0400, as defense of barrier options at the level wasnoted. USD-CAD peaked at 1.0394, though setbacks were shallow. Stops are seen now at 1.0410.

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