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By XE Market Analysis July 8, 2014 2:30 am
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    XE Market Analysis: Europe - Jul 08, 2014

    The dollar remained on a mixed footing, steady against the EUR and GBP in pre-Europe trade in Asia, down against a generally firmer yen following a bigger than expected current account surplus out of Japan. There was also divergence among the dollar bloc, with the AUD gaining on business confidence figure, while the CAD declined after the latest BoC's business outlook survey failed to show any material improvement, which saw Canadian yields dip. USD-JPY hit a six-day low of 101.68 and breached below the 200-day moving average on route. EUR-JPY and other yen crosses were also lower with the yen gaining after Japan's May current account balance showed a Y522.8 bln surplus, up on the median forecast for Y417.5 bln. The data came as markets are reducing expectations of the BoJ taking further monetary easing measures. In Australia, June NAB business confidence rose to a +8 reading, up from 7, and AUD-USD lifted to a five-day peak of 0.9395, stalling shy of 0.9400, which marks the present position of the 20-day moving average. EUR-USD flat-lined around the 1.3600 mark, while Cable oscillated around 1.7130-45. The U.K.'s BCC Q2 survey showed that the economy is growing at a robust rate, though exports and business investment weakened.

    [EUR, USD]
    EUR-USD remains on a downward path, extending the post-payrolls low on Monday to within one pip of the Jun-26 low at 1.3575 into scope, which is now a key near-term support level. Market analysts have been revising Fed expectations in the wakes of the stellar U.S. jobs report of last week(both GS and Barclays, for instance, now think Fed hikes are closer, the former now expecting a hike in Q3 2015 after previously forecasting Q1 216)). We expect EUR-USD to eventually move in on the May low at 1.3503. The failed breach of the 200-day moving average last week and the subsequent breach of support at 1.3600-05, which encompassed the 20-day moving average, has reaffirmed strongly bearish technical credentials. Resistance comes in at 1.3610-11, yesterday's high and 20-day moving average, ahead of 1.3640-50, which is a recent pivot and congestion zone.

    [USD, JPY]
    USD-JPY hit a six-day low of 101.68 and breached below the 200-day moving average on route. EUR-JPY and other yen crosses were also lower with the yen gaining after Japan's May current account balance showed a Y522.8 bln surplus, up on the median forecast for Y417.5 bln. The data came as markets are reducing expectations of the BoJ taking further monetary easing measures. Bigger picture, USD-JPY remains entrenched amid a broad sideways range, roughly contained within 100.00-105.00, which has been in place since early January. This stasis may persist for some time yet, though technical analysts will be marking this as a potential topping formation after the steep rally from levels around 75.0 that was seen during the second part of last year.

    [GBP, USD]
    Sterling has corrected lower in early week trade as weaker longs, coupled with corporate hedging, took a toll, though we remain sterling bullish. This week's U.K. production data should reaffirm the strong fundamental credentials of the pound, and be consistent with the BoE having left the hawkish starting gates ahead of the Fed and ECB. The BoE's stance was backed-up by last week's solid PMI report for June. A big-picture Fibonacci retracement level at 1.7330 in Cable, which is a 50% retracement level of the 2007 to 2009 decline, provides bulls with a target. Our EUR-GBP target is provided by the major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF breached 1.2150 last week and extended to a 1.2133 three-and-a-half month low, as the situations in Iraq and Ukraine continues to underpin the Swiss currency's safe-haven premium. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels, so far remaining unchallenged. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD firmer, logging an eight-day high just shy of 1.0700. The move reflects general CAD weakness after the latest BoC's business outlook survey failed to show any material improvement, which saw Canadian yields dip. USD-CAD breached below the 200-day moving average at 1.0783 on Jun-20 and had been trending lower since, but now looks set for a period of consolidation. Resistance is pegged at 1.6996 (Jun-27 high) and 1.0700. Recent price congestion around 1.0620-40 is support.

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