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By XE Market Analysis July 12, 2013 2:51 am
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    XE Market Analysis: Europe - Jul 12, 2013

    It was a session of consolidation for the FX majors following the sharp moves on Wednesday and Thursday. USD-JPY traded a tight range close to 99.00, EUR-USD was underpinned above 1.3070 and Cable traded just short of 1.5200. ECB vice president Constancio reiterated the need for accommodative policy for longer and said the Eurozone is behind the U.S. in recovery. The AUD came under pressure in early trade after China finance minister Lou said growth would average 7% this year, below the official 7.5% target, which raised expectations that Monday's Q2 GDP would be weaker than expected.

    [EUR, USD]
    EUR-USD found a short term floor ahead of 1.3000 yesterday and pushed back to the 1.3100 area. Short term indicators are pointing to potential upside in Europe. However, movement over 1.3100 and towards the 1.3130-50 region should run into reasonable sized selling pressure. Sovereign names were very active on Thursday into this region and the macro picture is still more favourable for the USD over the long-term.

    [USD, JPY]
    USD-JPY moved either side of 99.00 ahead of the long weekend in Tokyo. Japanese importers had early dollar buying interest, but offshore pushed it through 98.70. Follow through dollar selling was limited and USD-JPY edged out highs through 99.30 and then settled into a narrow range close to 99.00 for the remainder of the session. USD-JPY is expected to tread narrower ranges into the weekend. Good demand is still seen ahead of the 98.20 level, which is protecting large sell stops lower down. Movement on the topside is expected to meet steady supply from 99.50 to 100.00.

    [GBP, USD]
    Cable is consolidating at firmer levels after it took late Thursday. Dollar weakness and more corrective action in EUR-GBP sent Cable through buy stops over 1.5200 to reach 1.5222 highs. Central bank reserve management flows have limited gains in Asia and it is drifting back towards 1.5150 as EUR-GBP found a corporate bid at 0.8610. The short term technical picture for Cable is consolidative, but with a mild bias to higher levels after it held above support at 1.5050 yesterday.

    [USD, CHF]
    USD-CHF is in a holding pattern just under 0.9500 as the dollar consolidates at easier levels. The USD-CHF move has limited the EUR-CHF upside and it drifted back below 1.2400. The risk backdrop is limited in early Europe. Eurozone yields are still wider than they were, which usually works against EUR-CHF, while China GDP risk is now in focus ahead of Monday's early release.

    [USD, CAD]
    USD-CAD ranges have narrowed up considerably. After swinging between 1.0520 and 1.0320 since late Wednesday movement has slowed in the middle of the 1.03 handle. Dollar selling forced the pair down from 1.0400 in yesterday's N.Y. afternoon and it headed to 1.0360 in Asia. Equity markets are mixed currently and the FX market has a more defensive ahead of the weekend, which should reduce CAD$ inflows.

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