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By XE Market Analysis November 28, 2013 1:50 am
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    XE Market Analysis: Europe - Nov 28, 2013

    Movement was limited in Asia across the FX majors as order flow was kept to the minimum into today's U.S. Thanksgiving holiday. AUD posted the biggest move from 0.9080 to 0.9140 amid an unexpected rise in Australia Q3 capex by 3.6% q/q and NZD rose from 0.8120 towards 0.8180 amid a rise in business confidence from 53.2% to 60.5% in October. USD-JPY marked time close to 102.00, EUR-USD consolidation continued just under 1.3600 and Cable held firm above 1.6300. There was also Japan retail sales, which rose 2.3% y/y versus a 2.1% forecast, but it had no impact on the market. Sentiment in the region was positive after yesterday's Wall Street rally on the firmer U.S. data round.

    [EUR, USD]
    EUR-USD traded a narrow range under 1.3600 as a pick up in U.S. yields on Wednesday capped gains. EUR sentiment is still skewed to higher levels amid a better technical backdrop and the lack of downside progress despite persistent dovish rhetoric from ECB officials. There has been on going speculation that the EUR would be supported into year-end, though we suspect the ECB will have the final say on how high the euro trades.

    [USD, JPY]
    USD-JPY and the JPY crosses maintained firmer levels in Asia following yesterday's strong rally. Light profit taking went through, which capped USD-JPY over 102.25, but the downside was supported through 102.00 from importers and fund names. USD-JPY movement on the topside could be on the slow side due to very large option barriers between 102.25 and 102.50, while there are also huge barriers from 103.00-103.25 held by a U.S. account for expiry on December-20.

    [GBP, USD]
    Cable maintained firm tone overnight as profit taking from 1.6330 to 1.6260 ran its course. Cable rose gradually over the N.Y. afternoon and then squeezed up from 1.6280 to 1.6325 in Asia. Cable travelled quite a distance on high volumes on Wednesday and the slight moderation on the upside was not a surprise. However, momentum indicators are still pointing higher and the pullback in Cable has corrected overbought levels. If resistance between 1.6330 and 1.6380 gives way then another squeeze higher is likely. We know of at least two U.S. FX desks that turned short this week when Cable was below 1.6250 and they may be forced to bail if 2013 highs give way at 1.6380.

    [USD, CHF]
    EUR-CHF recovered modestly in front of 1.2300 yesterday and headed back through 1.2330 during the N.Y. session. The move higher was a function of USD-CHF firmness, though follow through was limited overnight due to the U.S. holiday. Movement in EUR-CHF should remain limited in our opinion as EUR-USD gains stalled out. There is also good support under 1.2300 from local names that are buying ahead of 1.2280, which has held since early October. The SNB have also reiterated its policy stance on any downside threat over the last few months and earlier in the week it warned that it was willing to defend the franc cap in unlimited amounts and also consider other policy options if needed.

    [USD, CAD]
    USD-CAD found good buyers on Wednesday, resulting in a move from near 1.0530 to highs of 1.0602. Not much on the Canadian calendar, though the heavy U.S. slate had some influence. Defense of barrier options at 1.0600 was reported, though the pairing touched 1.0600 before edging slightly lower. Stops are said to be large at 1.0610, just over the trend high seen four months ago. Over 1.0610, the next target will be 1.0657, the high posted on October 4, 2011.

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