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By XE Market Analysis June 28, 2013 2:58 am
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    XE Market Analysis: Europe - Jun 28, 2013

    The dollar traded higher through the morning session in N.Y. on Thursday, following stronger U.S. economic releases. May personal income beat expectations, while weekly jobless claims were in-line. May pending home sales were much better than forecasts, and resulted in the dollar moving to session highs in morning dealings. EUR-USD flirted with the 1.3000 mark, while USD-JPY moved briefly over 98.50. Trade is likely to be choppy through Friday's N.Y. close, as month/quarter end conditions prevail.

    [EUR, USD]
    EUR-USD and the EUR-crosses headed higher. USD, JPY and CHF were weighed by risk appetite, which helped the dollar headline rate up to 1.3075 from 1.3030 in early Asia, which compared with lows around 1.3000 at yesterday's London fix. There was speculation of flows related to month end/quarter end, which was tipped on Thursday and during in the Asia session. EUR-AUD was also boosted out of 1.4040 back to 1.4150, while EUR-GBP rose a notch to move over 0.8560.

    [USD, JPY]
    Risk appetite and month end/quarter end flows weighed heavily on JPY as a deluge of Japanese data was consistent with an economic recovery. USD-JPY traded above 99.00, while EUR, GBP and AUD benefited from speculative demand. Fed officials continued to played down fears of policy tapering on Thursday despite strong U.S. economic data, which boosted Wall Street and this was also influential in Asia, along with reduced concerns over China liquidity. PBoC Governor Zhou said it will adjust market liquidity as appropriate and guide financials to maintain reasonable lending policies.

    [GBP, USD]
    Cable found a modicum of support overnight after it threatened to break 1.5200 for the first time since June-02 on Thursday. Yesterday's breakdown was a negative signal, while the dollar uptrend also regained momentum today from broadly positive U.S. data. However, Cable has not traded under 1.5200 since June-2 and there is very good support at 1.5180 which has brought out buyers. Note, there are also reports that dollar selling could go through for quarter-end.

    [USD, CHF]
    The CHF consolidated Thursday's losses, which saw USD-CHF trade into 0.9485 and EUR-CHF boosted back over 1.2300. Macro funds have been positioning for USD-CHF upside since Wednessday after the 100-dma gave way on the way up. EUR-CHF has also made steady gains on heavy Swiss demand and a pick up in speculative activity. London sources said EUR-CHF has had more opportunity to rally now that one large fund name had finished unwinding a position related to emerging market exposure earlier in the week. The techical bias could see it target a push through offers at 1.2350 and 1.2365 during the European morning.

    [USD, CAD]
    USD-CAD briefly tested the 1.0500 region on Thursday and also spent more time around this area in Asia as quarter-end related short covering underpinned. Further gains were limited though after an impressive Asian market rally, which offered positive guidance for early European names. USD-CAD turned away from this region and headed back towards 1.0450. However, there are short term dollar buy orders into this region and remaining order flow at 1.0425-30 from earlier in the week. Equity markets should guide action, but it looks as if quarter-end activity will be heavier than usual after heavy risk-related moves in June.

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