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By XE Market Analysis August 12, 2013 6:25 am
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    XE Market Analysis: North America - Aug 12, 2013

    The European morning was fairly quiet and typical of thin summer markets. The dollar was higher overall, largely as a consequence of specific flows rather than a fundamental trigger. Demand for USD-JPY was evident as importers put a floor in place under 96.00 in Asia and it extended up through 96.50 in Europe to 96.85. Comments from Japanese officials hinted that the sales tax hike could be delayed after Q2 GDP slowed. Other standout flows included good Asian supply via AUD-USD and it headed from 0.9200 under 0.9150 and fed a USD-CAD recovery. Meanwhile, both EUR and Cable suffered from waning upward momentum as short term studies rolled over late Friday.

    [EUR, USD]
    EUR-USD threatened levels under 1.3300 as short term upward momentum waned after the overnight failure to move over 1.3350. Dollar strength has been observed against specific currencies pair, like AUD and JPY, but overall activity has been typical of thin summer trade. The daily chart is also looking more uncertain after very strong resistance held between 1.3400 and 1.3415-20 last week. On an intra-day basis, option expiries around 1.3300 are likely to exert an influence in quiet trade. There are still likely to be natural buyers on a push to 1.3265. Bids are also layered from a series of lows at the start of the month under 1.3250 and into 1.3200.

    [USD, JPY]
    USD-JPY registered a decent recovery. It spent a brief period under 96.00 following the slower than expected Q2 GDP outturn and then headed higher on good importer demand. By the European open USD-JPY had more than made up for the temporary drop and closed in on 96.50. EUR-JPY demand went through and USD-JPY squeezed up to 96.85. The Q2 GDP outturn saw both Amara and Hamada hint that a hike in sales tax could be delayed if the economy slowed, which was taken as a positive for risk appetite. Last week's breakdown in USD-JPY should still fuel selling pressure on upticks, along with expectations of repatriation flows in the coming week or so. However, it does look as if the 95.50 is now a near-term base.

    [GBP, USD]
    Cable tripped stops early on as the dollar strengthened. A move under 1.5480 fueled follow through selling to the 1.5460 region. The move was a symptom of broader dollar gains amid Japanese demand for USD-JPY and Asian selling via AUD-USD, which has spilled into other currency pairs. However, Cable was perhaps due a correction given the outsized gains since last week's BoE Inflation Report, where the market was reacted to the contingencies in the new forward guidance. U.K. recovery expectations are still holding up on broadly firmer survey data and other anecdotal reports of increasing activity. In the near-term, unless Cable can sustain a close over the 200-dma at 1.5532 it could begin to see selling pressure on upticks.

    [USD, CHF]
    CHF has struggled to sustain easier levels of late due to USD-CHF heaviness. However, it managed to push higher in Europe as the dollar pairing posted a recovery to 0.9275, leaving EUR-CHF firmly above 1.2300. Gains could begin to slow towards offer at 1.2330 and there are more sellers anticipated across 1.2350. On the weekend, SNB's Danthine reiterated his commitment to the EUR-CHF floor at 1.2000 on the weekend, adding that it will not abolish the cap until it starts raising interest rates.

    [USD, CAD]
    CAD fell in sympathy with AUD, which helped USD-CAD back over 1.0300. Dollar buying went through from 1.0285 and it cleared 1.0300. The move is against the grain of the technical backdrop which is negative after USD-CAD recorded a close under 1.0300 on Friday. A plunge in Canada jobs and a dip in housing starts boosted USD-CAD to 1.0350, where good leverage account selling went through and it ended the session net unchanged. From a technical perspective USD-CAD has struggled since it was unable to hold on to the 1.04 handle. Intra-day, good size 1.0300 option expiries could attract.

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