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By XE Market Analysis September 13, 2013 11:05 am
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    XE Market Analysis: Europe - Sep 13, 2013

    The dollar recovered some of Thursday's lost ground, though the well defined weekly range remained intact. There was no appetite to force a break of range ahead of next week's FOMC meeting. The situation in Syria is not as clear cut as it was with Syria leader Assad pushing back against the proposed chemical weapons handover. The economic calendar was lean and the highlight was Japan revised industrial output, which came in at 3.4% in July from 3.2% previously. The Japanese government upgraded it economic assessment in September as the economy heads towards a gradual recovery. FX flows were mostly isolated to USD-JPY, which moved into the 100.00 area after 99.00 held on Thursday. EUR eased under 1.3300 and Cable corrected under 1.5800 as a result, while AUD idled around 0.9250.

    [EUR, USD]
    EUR-USD started the session close to 1.3300 after good resistance at 1.3330 held on Thursday. USD-JPY's upturn was the catalyst for broader dollar movement in Asia and it leaned on the EUR over the course of the Asian afternoon. EUR headed back to the 1.3265 area by the Asia close and eyes interim support at 1.3250. EUR-USD's inability to clear key levels yesterday suggests that range trading will continue ahead of next week's FOMC meeting. Bias may revert to lower levels if close-to-market support from 1.3230 to 1.3200 comes into play.

    [USD, JPY]
    USD-JPY started the session around 99.50 after it found good support into 99.00 on Thursday. USD-JPY slipped lower after yesterday's N.Y. options cut, but got a fillip on a Nikkei report that rehashed talk of corporate tax cut in Japan. Dollar buying interest was steady out of Tokyo with corporate names and general short covering in the mix. Some of the flows were fix related, along with pre-weekend position squaring ahead of Monday's Tokyo holiday. The government upgraded its assessment on the economy and cited signs of a recovery in the services sector. However, it downgraded the outlook for consumer spending and exports. Exporter offers and profit taking activity should emerge over 100.00 given the lack of sustained progress on higher levels this week.

    [GBP, USD]
    Cable corrected from Thursday's new trend highs at 1.5840. The move appeared to be dollar related as a block of currencies took off after the options cut. Follow through was contained by a series of resistance levels in several currencies, which included Cable barriers at 1.5850. Cable should meet good supply on upticks in light of very large 1.5800 magnet expiries, which have attracted in the last three sessions. Corrections are still very shallow though and longs target extended gains unless there is a move back below 1.5750, which was a major top before it took off on Wednesday's strong employment data. Since Wednesday buyers have been camped between 1.5780 and 1.5760.

    [USD, CHF]
    EUR-CHF experiences limited upside as equity markets are moving sideways amid subdued activity ahead of next week's FOMC outcome. There is still some uncertainty regarding Syria, but tensions have faded as leaders pursue the diplomatic route for now. EUR-CHF found interim support at 1.2350 on Thursday, which should prop up intra-day. The EUR-CHF downside was absorbed to a degree by a USD-CHF move back to 0.9340, but both the cross and the dollar pairing could struggle as recent swissy shorts are pared back into pending event risks next week.

    [USD, CAD]
    USD-CAD maintained a very narrow trading band after it found support into 1.0310 on Thursday. Barrier options were reported at 1.0300, and were defended on dips toward 1.0310. Softer risk taking levels, and the selloff in gold and silver provided some support to the pairing and it drifted back over 1.0340 by late Asia. There is some price congestion into 1.0350, which could encourage offers, while better orders lie towards 1.0370.

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