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By XE Market Analysis October 13, 2016 3:25 am
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    XE Market Analysis: Europe - Oct 13, 2016

    A big miss in Chinese exports drove a risk-off play in forex markets in the Asia session. AUD-JPY, which is a risk appetite proxy, shed nearly 1%, while USD-JPY, which had earlier clocked a 10-week high at 104.63, tipped back sharply to a low of 103.55, subsequently settling around 103.80. Aside from the 10% y/y dive in Chinese exports, softer oil prices and the latest FOMC minutes highlighting of hawkish arguments at the Fed were also in the mix of risk appetite spoilers. The yen gained in accordance with its historical inverse correlation with global stock market direction. The MSCI Asia-Pacific ex-Japan index lost over 1% as it fell into three-week low territory. USD-JPY needs to hold 103.28, yesterday's low, to retain bullish trend credentials. A breach would signal a greater risk of a mean reversion move. The 20- and 50-day moving averages are presently at 102.09 and 101/89, respectively.

    [EUR, USD]
    EUR-USD clocked a new 10-week low at 1.1002. Fed tightening expectations (all of our latest, post-employment data, survey respondents expected a tightening to occur at the December 13-14 FOMC meeting) have juxtaposed to ECB policymakers recent downplaying last week's Bloomberg report that an internal consensus had been reached to taper the QE program. EUR-USD's technical picture remains one of bearish momentum. The pair has broken back below, and posted three daily closes below, the 200-day moving average, which is presently sitting at 1.1172. Next downside waypoints are July lows near 1.0950.

    [USD, JPY]
    A big miss in Chinese exports drove a risk-off play in forex markets in the Asia session, which boosted the yen. AUD-JPY, which is a risk appetite proxy, shed nearly 1%, while USD-JPY, which had earlier clocked a 10-week high at 104.63, tipped back sharply to a low of 103.55, subsequently settling around 103.80. Aside from the 10% y/y dive in Chinese exports, softer oil prices and the latest FOMC minutes highlighting of hawkish arguments at the Fed were also in the mix of risk appetite spoilers. The yen gained in accordance with its historical inverse correlation with global stock market direction. The MSCI Asia-Pacific ex-Japan index lost over 1% as it fell into three-week low territory. USD-JPY needs to hold 103.28, yesterday's low, to retain bullish trend credentials. A breach would signal a greater risk of a mean reversion move. The 20- and 50-day moving averages are presently at 102.09 and 101/89, respectively.

    [GBP, USD]
    Sterling has found a toehold over the last day after PM May has backed down and will allow parliament an "open and transparent debate" of the government's Brexit plan before Article 50 of the Lisbon Treaty is triggered. For markets this development is a sign that the government could be forced to dilute its "hard Brexit" stance, although this will remain to be seen. Cable's lows from the last two days, at 1.2089 and 1.2105, now mark support. There seems little scope for mean reversion given the uncertainties ahead and trickle of worrisome news linked to Brexit consequences that is starting to flow (UK supermarket Tesco, for instance, is running short of various items due to a disagreement with Unilever, one of its big suppliers, on surging prices).

    [USD, CHF]
    EUR-CHF has come off the boil after rallying back above 1.0950 earlier in the week, when the cross stalled shy of last week's three-week peak at 1.0975. After seeing a one-year low at 1.0623 on June 24, in the immediate wake of the UK's vote to leave the European Union, EUR-CHF looks to have settled, albeit with some chop and occasional SNB assistance, in an orbit centred around 1.0800-1.0900. More of the same looks likely.

    [USD, CAD]
    USD-CAD has lifted towards the 1.3313 trend high seen on Friday. Softer oil prices along with the minutes to the recent FOMC, whish showcased hawkish arguments at the Fed, underpinned the pair. Support is marked at 1.3196, which is the present situation of the 200-day moving average.

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