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By XE Market Analysis September 24, 2013 2:01 am
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    XE Market Analysis: Europe - Sep 24, 2013

    Risk aversion continued in Asia, which supported JPY and CHF, while the USD maintained a mixed tone. EUR traded on the heavier side after it closed just under 1.3500 on Monday, while Cable held on to levels above 1.6000. The lack of interest to put on speculative positions capped AUD and it drifted back into 0.9400, while NZD-USD fell to 0.8315 on cross flows. The lack of Fed taper last week left uncertainty in global markets and this dampened flows, while the U.S. debt ceiling is also shaping up to be a potential risk into October.

    [EUR, USD]
    EUR-USD maintained tight ranges close to 1.3500, but near-term risk has shifted slightly to lower levels after 1.3500 and 1.3490 gave way during Monday's N.Y. session. ECB's Draghi made more dovish sounding remarks late Monday, stating he was prepared to use any instrument, including another LTRO to keep the monetary stance. We see this as a growing risk towards year-end as recent LTRO repayments could see in reduction of liquidity ahead. We look for an eventual move to 1.3400-1.3380, which represents the pre-FOMC level.

    [USD, JPY]
    USD-JPY and the JPY crosses remained heavy following Monday's losses. The return of Japanese players after Monday's Japan holiday fueled moderate dollar demand, but USD-JPY movement back towards 98.90 ran into speculative flows and it traded close to 98.70 into the Tokyo close. EUR-JPY edged out lows near 133.15 and AUD-JPY fell from 93.20 to 92.75. The pace of the USD-JPY downturn should slow under 98.50 amid reports of larger flows from Asian real money. However, an uncertain U.S. outlook and the lack of risk taking will leave the balance of risk on lower levels.

    [GBP, USD]
    Cable is hanging on to levels just above 1.6000 due to EUR-GBP heaviness. European accounts were persistent sellers of the cross on Monday in anticipation of hedging related to EU farming subsidies that are expected to go through over the course of the week. It is currently trading near 0.8420, but should meet supply on upticks into 0.8450. Cable is still being supported into 1.6000 and below, but offers that were noted over 1.6100 last week have been lowered to 1.6070-80 and into 1.6100.

    [USD, CHF]
    EUR-CHF is trading on the heavy side under 1.2300 after it managed to sustain a close under the 200-dma on Monday. Losses under 1.2300 were limited to 1.2275-80 and tight ranges prevailed near 1.2285-90 in Asia. Macro funds used the break of the 200-dma as a buying opportunity as bids at 1.2275 and 1.2265 held. Meanwhile, USD-CHF, which hit trend lows of 0.9085, also recovered and headed back over 0.9100. Support in USD-CHF is noted between 0.9075 and 0.9065 ahead of option barriers from 0.9050.

    [USD, CAD]
    USD-CAD made little progress in either direction in the last 24 hours. After pressing a bit higher early Monday it drifted from 1.0310 back to 1.0275. Two way flows have narrowed up and this is likely to lead to more rangebound action. Offers are noted at 1.0330-50 and a layer of bids are reported at 1.0270. There was little data to drive direction, though softer oil prices and a downturn in stocks could support USD-CAD to a degree. The focus will come from Canadian retail sales data in early North American trade.

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