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By XE Market Analysis July 25, 2013 2:07 am
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    XE Market Analysis: Europe - Jul 25, 2013

    It was a quiet session in Asia. The dollar held steady after yesterday's pick up in U.S. yields. The 10-year benchmark rose in Asia to 2.607%, which supported the dollar on dips and left EUR close to 1.3200 and USD-JPY close to 100.00. AUD-USD remained heavy following the stop hunt below 0.9180 after yesterday's European close and it extended to 0.9130 overnight. The RBNZ left rates unchanged at 2.5%, but the accompanying policy statement was more hawkish than expected and boosted NZD-USD from 0.7905 in early trade to 0.7990 by late Asia.

    [EUR, USD]
    EUR-USD found a modicum of support on dips, which lifted it out of 1.3190 to 1.3220 by late Asia. Bias is still on higher levels in the near-term, which will encourage a congestion of supportive flows on dips. However, the rise in U.S. yields is likely to work against the topside. On Wednesday, the rally was restricted by real money selling and there are very strong orders from 1.3260-70.

    [USD, JPY]
    USD-JPY benefited from the underlying trend early on. U.S. fund names and Japanese importers forced a move back up yesterday's highs around 100.45. However, it ran into strong offers and profit taking set in and it reverted to the lower end of the recent range at 99.85-90. Higher U.S. yields should keep USD-JPY close to 100.00, but the influence of very large option expiries could see more movement between 100.00 and 100.50 on an intra-day basis.

    [GBP, USD]
    Cable stabilized after Wednesday's correction saw it traded at 1.5289 lows as good support gave way from 1.5335 down to 1.5300. The downturn was largely due to dollar strength as U.S. yields rose. Demand in Asia was noted from the 1.5310 area up to 1.5345. However, in the last few sessions it has struggled to benefit from bullish impetus on the daily chart and the lack of progress on 1.5400 is a potential risk for longs. Today's impetus will come from U.K. GDP data.

    [USD, CHF]
    EUR-CHF remains sidelined as the focus continues to come from competing EUR and USD flows. USD-CHF failed to sustain another downside push yesterday and bounced back to the 0.9390 area by the N.Y. afternoon on dollar strength. However, upward momentum is looking more limited since it briefly traded under the 200-dma on Monday, which is fueling selling pressure on upticks.

    [USD, CAD]
    USD-CAD rebounded out of new one-month lows on Wednesday. It traded at 1.0263 at the North American open but has spent most of time thereafter on the front foot as a combination of dollar strength and a downturn in risk appetite weighed. It reached the 1.0325 area by the North American close as trailing stops went through on the break of 1.0310 and 1.0320. Further gains have been limited in Asia due to good offers from 1.0330, which were lowered early on in the week.

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