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By XE Market Analysis September 16, 2013 2:14 pm
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    XE Market Analysis: Asia - Sep 16, 2013

    Fallout from Larry Summers' withdrawal from Fed chairman consideration faded through the N.Y. session, as the dollar clawed back some of its overnight losses. Equities and Treasuries maintained a good chunk of their gains though, as markets pondered Fed tapering under Janet Yellen's helm. On the economic front, the Empire State index was light of expectations, while industrial production came in near forecasts. Neither had much lasting impact on markets. Traders are likely to hunker down some into Wednesday's FOMC announcement and Bernanke press conference, where it remains to be seen how much taper the FOMC decides on.

    [EUR, USD]
    EUR-USD gains were limited to 1.3385 in morning trade, and the pairing eased back under 1.3355. Option backed offers were reported from 1.3390, with 1.3400 barriers being defended. The London low near 1.3340 provided interim support. EUR-USD later peeked marginally below the earlier bottom of 1.3341, touching a 1.3338 base. Some sell stops were noted, though euro dip buying remained in place. Better bids are reported at 1.3320-00. The pairing had been trending lower since mid-morning, as heavy selling interest was noted from 1.3380 to 1.3400.

    [USD, JPY]
    USD-JPY probed downside support under 98.70 in line with softer U.S. yields. It edged out N.Y. lows near 98.65, which were the weakest levels since early Asia slump. As the dollar recovered however, the pairing moved back over 99.00. We look for further weakness going forward, with the top of the Ichimoku cloud looking like an obvious target near 98.25-30, where a series of other short-term technical support levels are seen ahead of natural demand at 98.00. USD-JPY was seen as a decent medium term long previously, but longer-term players have grown more sceptical on the lack of sustained upside movement. As well as the potential Fed outlook there could also be more dollar difficulty ahead if Obama's recent policy disappointments turn into a protracted debt ceiling fight in October.

    [GBP, USD]
    Cable was firm in early N.Y. trade as the dollar struggled to assert itself in the face of Fed Chairman conjecture and weaker than expected U.S. data. The soft patch of U.S. data into the FOMC outcome raises the potential for more dollar weakness. However, Cable looked toppish ahead of the key 1.6000 level. There are long-standing barriers at 1.6000 and key technical resistance between 1.6025 and 1.6050, inclusive of more option exposure. As the USD recovered some through the session, cable headed back toward 1.5900, after peaking at 1.5963

    [USD, CHF]
    EUR-CHF traded from 1.2380, to close to 1.2355 and USD-CHF near 0.9250. The CHF was forced higher overnight as news on the candidacy for Fed Chairman weighed heavily on USD-CHF. USD-CHF dropped from 0.9300 to 0.9235 overnight, though found light buying interest in N.Y. dealings. We still think the downside in the CHF will remain limited into Wednesday's Fed policy outcome and then Thursday's SNB meeting.

    [USD, CAD]
    USD-CAD gapped under 1.0300 at the Asian open, falling to 1.0284 lows in London, from Friday's close over 1.0350. European real money accounts were the main source of support through the London morning, though sell stops are noted at 1.0270, just under the August 9 low. As the greenback came off its lows generally though, USD-CAD managed to reclaim the 1.0300 handle, peaking later at 1.0323.

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