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By XE Market Analysis July 1, 2013 3:06 am
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    XE Market Analysis: Europe - Jul 01, 2013

    The focus for Asia FX came from economic data out of Japan and China. The Japanese Tankan report came in on the firmer side of expectations with big manufacturers and non-manufacturing picking up from the previous outturn, which underpinned recovery expectations and boosted USD-JPY to 99.50. China manufacturing PMI slowed from 50.8 in May to 50.1 in June, which was a notch better than expected. HSBC's final manufacturing reading came in at 48.2 versus 48.3 in the flash reading. AUD overcame an early dip towards 0.9110 and moved back over 0.9190 on positive domestic developments. Meanwhile, the dollar was a bit easier against the EUR as good bids from 1.3000 put a floor in place in early Asia. In Europe, manufacturing PMIs are due, along with eurozone CPI and jobless data.

    [EUR, USD]
    EUR-USD challenged the 1.3000 area in early trade following Friday's downturn. However, good bids noted from 1.3000 and below put a floor in place and it moved back through 1.3000 on short covering and EUR-JPY demand amid good Japanese data. There is still appetite to sell the EUR on upticks, with markets still sensitive to Fed policy risk despite last week's attempt to allay market fears from several Fed officials. Offers lie just over 1.3050 in and in front of the 1.3100 level.

    [USD, JPY]
    USD-JPY was supported amid a stronger than expected Tankan report, which boosted stocks and backed the Japanese policy stance. Both Economy Minister Amari and Cabinet Secretary Suga welcomed the report and offered supportive words for Abenomics. Good demand was noted out of the 99.10-15 region early on and it moved up through 99.50 initially. However, further gains were capped by Japanese exporter selling and there was some sporadic offshore interest, which may be linked to outstanding options higher up. Order congestion is likely to be heavy from 99.50 to 100.00. A plethora of buyers are seen across 99.00 and from 99.80 to 99.60 initially.

    [GBP, USD]
    GBP found a modicum of support on dips. The dollar was a touch easier in Asia on light repositioning, which helped Cable up from the 1.5200 region back over 1.5200. Cable is still at the lower end of the recent range and may run into selling pressure on upticks after last week push lower, which took it under 1.5200. EUR-GBP is consolidative around the 0.8550 region and may experience more sideways action following the rebound out of the 0.8470 area up to 0.8590 last week.

    [USD, CHF]
    EUR-CHF is trading across the 1.2300 region following Friday's correction from over 1.2350 down to 1.2285. The downturn in the cross was a symptom of equity market heaviness and general EUR weakness. Uncertainty over Fed policy picked up again on Friday after Stein tipped September as a potential month for tapering QE. Lacker, who is a non-voter and a hawk, also said the September meeting was a possibility depending on data. The Fed outlook has left USD-CHF underpinned around 0.9450, leaving it just a short distance from recent highs around 0.9490.

    [USD, CAD]
    USD-CAD edged back into 1.0500 by early Europe. CAD$ firmed up in Asia in line with an AUD-USD short covering rally. On Friday, it corrected from the 1.0553 region, where more aggressive selling went through just ahead of the previous trend high at 1.0556. There is natural support around 1.0500 and 1.0480, which could keep the downside intact, while uncertainty over the China outlook could also limit equity market gains in Europe and in-turn the commodity bloc currencies.

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