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By XE Market Analysis January 14, 2014 3:11 am
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    XE Market Analysis: Europe - Jan 14, 2014

    USD-JPY made a fresh low during the NY afternoon session of 102.85 and subsequently rebounded during the Asian session to 103.52 before settling. Hefty stock market losses in Asia curtailed yen weakness. Data showed that Japan's current-account deficit widened to a record in November on the back of higher imports. The risk-off backdrop saw the Aussie ebb, with AUD-USD making a low of 0.9020, though this was still less than a 35 loss versus Monday's London closing level. EUR-USD was pretty steady, oscillating around the mid-to-upper 1.36s.

    [EUR, USD]
    EUR-USD has continued to consolidate in the 1.36s after extending the rebound from last Thursday's six-week low of 1.3548 following the sub-expectations U.S. payrolls report. The market now lacks direction, and we expect broad range trade to ensure in the coming weeks. The dollar bullish view has been put on hold following the U.S. jobs data, which has capped a run of mostly firm Stateside data. In the Eurozone, a relatively quiet week looms as there are no data releases that would change the overall outlook. EUR-USD has initial resistance is marked at 1.3700 ahead of 1.3758-60, support at 1.3650 and yesterday's 1.3637 low.
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    [USD, JPY]
    USD-JPY made a fresh low during the Monday NY afternoon session of 102.85 and subsequently rebounded during the Asian session to 103.52 before settling. Hefty stock market losses in Asia curtailed yen weakness. Stock investors are fretting about corporate profits as we go into the quarterly earnings season. Data showed that Japan's current-account deficit widened to a record in November on the back of higher imports. In the bigger picture, we the BoJ's expansive monetary policy will continue to drive the yen to fresh lows during 2014. Data this month showed Japan's monetary base surged 46.6% y/y in December to a record Y193.5 tln, illustrating the impact that the BoJ's reflationary policy is having. The BoJ is targeting a monetary base to Y270 tln by the end of the year.

    [GBP, USD]
    We've changed out of our previously bullish view on sterling. Recent U.K. real sector data and survey evidence have shown that the economy isn't sustaining growth momentum as well has had been thought, though following a period of above long-term trend growth a moderation in pace should not be too surprising. Among recent data were November production figures that unexpectedly stagnated, construction output that fell by its biggest margin in 17 months (of 4%), the BRC retail sales figure for December that fell shy of expectations, and disappointing December PMI surveys. Cable and EUR-GBP have reflected this by respectively slumping to range lows under 1.6400 and two-week highs near 0.8350. Cable has breached below its 50-day moving average and a breach below its Jan-7 low of 1.6337 would strengthen the bearish argument from a technical perspective.

    [USD, CHF]
    The CHF has seen some choppy price action in recent sessions, but overall we expect the currency to remain on a bigger-picture softer footing as a consequence of the unwinding in the Swiss currency's safe haven premium as the period of Fed policy uncertainty ended with its decision to commence QE tapering. Resistance comes in at 1.2400, support at 1.2320 and 1.2300.

    [USD, CAD]
    USD-CAD has broken sharply higher over the last week, partly driven by weaker Canadian data and the consequent underpinning of favourable yield differential movement. The pair broke 1.0700, 1.0800 and now 1.0900, taking out its Dec-20 major trend peak of 1.7337 on route. The price action marks a break higher after some pretty choppy price action over the last several of weeks. Resistance can now be expected at 1.0950 and 1.1000, support at 1.0800-1.0820.

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