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By XE Market Analysis August 14, 2013 2:29 am
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    XE Market Analysis: Europe - Aug 14, 2013

    The G10 FX experienced a holding pattern in quiet trade. Only JPY posted a very modest move higher as the Nikkei experienced profit taking, which left USD-JPY close to 98.00 from the 98.30 area. EUR traded near 1.3250 following Tuesday's downturn amid a broadly firmer dollar tone as U.S. yields headed higher. The commodity bloc currencies remained on the heavy side, which left AUD-USD under 0.9100 and USD-CAD moved over 1.0350. Economic data was thin on the ground. Australia Westpac/MI consumer confidence rose 3.5% m/m in August to 105.7 and was 9.4% higher on the year to reach a five month high. Australia Q2 wage price index was up 0.7% q/q and 2.9% y/y. In New Zealand, Q2 retail sales beat expectations and was up 1.7% q/q and 3.3% y/y.

    [EUR, USD]
    EUR-USD continued to trade near the 1.3250 level, little changed from Tuesday's N.Y. closing levels. Firmer Treasury yields have weighed on the euro in the last 24 hours or so as the market gets onboard for a September Fed taper. EUR-USD's inability to clear very strong resistance from 1.3400-20 has also left a bearish sloping pattern on the daily chart since late last week and more selling into strength is anticipated in the near-term. However, on an intra-day basis it may receive support from Eurozone growth data, which is expected to surprise on the topside.

    [USD, JPY]
    JPY firmed up as intra-day accounts were influenced by profit taking activity via the Nikkei. It gave back early gains and forced USD-JPY from 98.30 to 97.85 by late Asia. However, a late move higher into the Tokyo close helped USD-JPY back to recent highs by the time the European session got underway. Buyers under 98.00 were mostly from short term speculative funds. Offers higher up include corporate flows from 98.50 and option related activity is tipped from the 98.80 level up to 99.20. Bias for USD-JPY is higher since it held the 95.50 area last week and the dollar benefits from a pick up in U.S. yields.

    [GBP, USD]
    GBP is steady as market participants await today's BoE minutes and the latest U.K. employment numbers. Cable is trading around 1.5450 and EUR-GBP has moved back into 0.8600 after it recovered from a stop hunt under 0.8540 on Tuesday. Firmer than expected GDP readings out of Europe have aided the EUR tone, which is helping the cross. Cable should maintain narrow ranges until 9:30BST when the key U.K. releases are due. The BoE vote is expected to be unanimous, while U.K. employment should show further improvement.

    [USD, CHF]
    EUR-CHF traded above 1.2405 for the first time since July-11 as it benefited from firmer than expected Eurozone data. Traders tipped leverage fund positioning via USD-CHF and EUR-CHF for the first time in some weeks on Tuesday as recovery expectations gather pace in Europe. USD-CHF is supported by a run of firmer daily closes, leaving it well supported over 0.9300 and EUR-CHF may have scope for a move towards 1.2450 if the EUR can sustain higher levels. EUR longs may see better value via the crosses as EUR-USD struggles due to expectations of Fed policy tapering.

    [USD, CAD]
    USD-CAD moved over 1.0350 overnight as U.S. yields held up amid expectations of Fed policy tapering. The pick up in USD-CAD may slow though amid an overhang of fund offers from 1.0360-70, while firmer equity markets in Europe could work against the topside. Better European growth data should also raise expectations of improved demand for raw materials and will be a background positive for the commodity bloc on the periphery.

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