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By XE Market Analysis June 11, 2013 3:20 am
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    XE Market Analysis: Europe - Jun 11, 2013

    The dollar weakened overnight as intra-day accounts keyed off a downturn in USD-JPY amid disappointment that the BoJ left policy unchanged. The focus will turn to the accompanying press conference from BoJ Governor Kuroda, which is expected to cover recent market volatility and reiterate the BoJ commitment to the 2% inflation target. Today's German court hearing on the the eurozone bailouts and the ECB's OMT is also a potential focus. ECB's Draghi made hawkish remarks yesterday and this has underpinned the EUR today. Longs look likely to threaten last week's top just above 1.3300 and highs from late February close to 1.3320. Cable is on course to make a sustained break of 1.5600 amid a bullish underlying tone and of course the run of recent U.K. data improvement. U.K. releases today include U.K. industrial production data

    [EUR, USD]
    EUR-USD started the session close to 1.3250 and then headed up to 1.3292 intra-day highs as it benefited on the downturn in USD-JPY over the BoJ policy decision. EUR spiked higher after yesterday's European close as a thin market reacted to comments from ECB's Draghi, who made hawkish sounding remarks in a television interview yesterday ahead of the German constitutional court hearing on the OMT program. The market did seem to overreact to the comments given that economic fundamentals are still poor in the eurozone. However, when taken together with last week's ECB it does look as if prospects for more ECB policy stimulus are well off the radar. EUR longs are likely to retest last week's top at 1.3306 and February-25 highs at 1.3319.

    [USD, JPY]
    USD-JPY ended the Tokyo session just above 98.00. An unchanged BoJ policy stance triggered a shakeout in USD-JPY and stocks tumbled. The pair had started the session just under 99.00 versus yesterday's 99.28 highs and hit 97.80 lows. There was disappointment that the BoJ did not extend the current loan program, but it did upgrade the economic outlook. Comments from BoJ Governor Kuroda will be carefully scrutinised after the marked pick up in volatility across stocks and FX over the last week. There are still very good bids noted from 97.50 to 97.30, which are protecting a batch of sell stops lower down. The topside is looking more limited now, with 99.00 a level for intra-day accounts, but even larger offers are seen from 99.50 up to 100.00 as corporate Japan looks to lock in current levels after the sharp price swings since USD-JPY hit 103.73 trend highs on May-22.

    [GBP, USD]
    Cable threatened levels over 1.5600 in Asia, but stalled just short of last week's highs of 1.5606. It early Europe it has pulled back a touch towards 1.5575. However, the underlying tone and the recent improvement in economic fundamentals should reinforce buying interest on dips. The 1.5605-10 region is an initial pivot point for intra-day accounts. Ultimately, longs will want to see how Cable performs towards 1.5700, where prices topped out last week ahead of the 200-dma at 1.5705-10.

    [USD, CHF]
    CHF is consolidating after it failed to sustain Monday's downside moves. EUR-CHF topped out at 1.2420 and headed back to the 1.2365-70 region and USD-CHF fell short of Friday's 0.9434 top on Monday and headed back to 0.9305 overnight as EUR-USD pressed higher. Equity market moves overnight have not really influenced the swissy and it looks as if EUR-USD will guide action intra-day. Note, SNB's Danthine reiterated the SNB's commitment to current FX policy, stating that the CHF cap is an indispensable tool now and in the foreseeable future. Danthin expected inflation to turn positive by year-end.

    [USD, CAD]
    USD-CAD edged back over 1.0200 as good bids from 1.0180 to 1.0160 put a floor in place overnight. Overall, USD-CAD is confined to the recent trading range as broader dollar moves are offset by movement across stock and commodity markets. Asian stock market weakness weighed a touch on CAD$ during the Asian afternoon and this theme has been carried into the European session. Note, offers remain from the 1.0230 area, which capped during Monday's North American afternoon session.

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