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By XE Market Analysis June 17, 2013 3:03 am
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    XE Market Analysis: Europe - Jun 17, 2013

    The dollar was led higher in Asia by USD-JPY gains as intra-day accounts keyed off a Nikkei rally for the second consecutive session. The move higher weighed on EUR-USD over 1.3350, while AUD-USD experienced a short squeeze above 0.9600 on broad equity market gains. Movement over the European session may be on the quieter side as the G8 meeting gets underway tonight from Northern Ireland. Wednesday's FOMC meeting is also in focus, with Fed policy the subject of intense speculation over the last few weeks.

    [EUR, USD]
    EUR-USD was weighed by the move up in USD-JPY in the absence of other leads. Option related offers remain ahead of outstanding 1.3400 barriers, but overall there was a lack of impetus into the G8 and the FOMC meeting. It headed into 1.3320 by late Asia and consolidated as early European accounts entered the market. In recent sessions EUR has been supported on dips amid the ECB policy outlook and a reduction in EUR short positions. However, the market is now more broadly balanced going into the FOMC and there may be potential for a sustained move later this week. Of note, CFTC data revealed that net EUR short positions were cut by 85% to $1.3 bln and are now the smallest since February-12.

    [USD, JPY]
    USD-JPY rallied out of the 94.00 region early on and headed towards 95.00 as stocks overcame early weakness in Asia to post a moderate rally for the second consecutive session. Buyers included importers and short term specs, but the upside is looking more limited. There are doubts still over Japanese policy and exporters that were waiting for better levels are hedging with more frequency after the recent liquidation in speculative positioning.

    [GBP, USD]
    Cable is trading a tight range close to 1.5700. The pick up in the dollar in Asia fueled a move down from the 1.5730 region. However, underlying GBP support and the steadying risk backdrop is encouraging demand on dips. Cable should remain supported towards the 1.5670-50 region and longs are still skewed to a push back towards option strike territory from 1.5740-50.

    [USD, CHF]
    The CHF is still settled at slightly easier levels than we've seen of late as risk appetite ended last week on a more positive footing and this tone carried into today's Asian session. EUR-CHF is stable ahead of 1.2300 and USD-CHF is underpinned ahead of 0.9200. Interest to run long USD-CHF positions ahead of this week's FOMC meeting and SNB policy outcome was evident last week. The SNB are expected to maintain the current policy stance, but there has been intense speculation in recent weeks that the Fed could begin to taper QE later this year.

    [USD, CAD]
    USD-CAD is steadier around the 1.0150 region following Friday's downturn below sell stops at 1.0145. In Asia, the pick up in risk appetite fueled selling pressure on upticks, while last Friday's fall has also shifted the short term picture to another downside test. Some bids were reestablished from 1.0135 to 1.0125 overnight and there are corporate backed orders from 1.0120 to 1.0100. Offers are noted ahead of 1.0200 currently.

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