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By XE Market Analysis August 14, 2013 6:40 am
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    XE Market Analysis: North America - Aug 14, 2013

    The dollar maintained a steady to firmer tone. A late rally in the Nikkei provided a lift to USD-JPY from 98.00 to 98.40 in early Europe before exporter offers set in, although it held on to the majority of these gains ahead of the N.Y. open. The CHF continued to experience leverage fund selling. EUR-CHF was boosted by a pick up in Eurozone Q2 GDP and it move into 1.2425, which were one-month highs. GBP posted a modest rally as the U.K. claimant count dropped to its lowest levels since February 2009. EUR-USD continued to experience limited upside despite encouraging Eurozone data. It moved into 1.3280, but Fed taper risk and a bearish sloping pattern on the daily chart forced it back below 1.3250.

    [EUR, USD]
    EUR-USD could not sustain higher levels despite positive Eurozone growth data. The overall Q2 reading came in at 0.3% q/q, but Germany and France accounted for most of the improvement, though there are signs that the recession is beginning to ease in other countries. EUR traded from 1.3255 to 1.3280 on the early releases from France and Germany, but was unable to sustain a move on 1.3300 due to an overhang of macro fund offers. EUR-GBP's drop also weighed, while EUR-CHF also ran into fund names around 1.2425. The EUR reverted to levels under 1.3250 and the downward sloping pattern on the daily chart continues to indicate further weakness.

    [USD, JPY]
    USD-JPY is underpinned ahead of 98.00. It firmed up from 97.90 to 98.42 highs in the last hour of Tokyo trade as the Nikkei turned a modest loss to close 1.32% higher. The move was exaggerated by thin trading conditions and exporter offers forced a move back towards 98.00 in early Europe as EUR responded to GDP numbers from France and Germany. Bias for USD-JPY remains with the topside though amid a bullish technical backdrop, along with underlying firmness via U.S. Treasury yields. The pick up in USD-JPY has fueled demand for short dated options, with overnight strikes changing hands at 99.75, while 100.00 interest for early next week was also reported on Tuesday.

    [GBP, USD]
    GBP was higher overall after the U.K. claimant count dropped again and the BoE minutes revealed a 8-1 vote for formal policy guidance. The June claimant count was the lowest since February 2009 after it registered a larger than expected fall of 29.2k. BoE's Weale was the only dissenter on the policy vote and wanted a shorter timeline for the 2.5% inflation knockout. Cable rallied out of 1.5440 and hit 1.5506 highs on the initial releases and then edged back towards 1.5470 on profit taking. EUR-GBP pulled back from just ahead of 0.8600 to 0.8555 and then edged back over 0.8570.

    [USD, CHF]
    EUR-CHF pushed higher on steady leverage account demand. Yesterday's move into the 1.2370 set the market up for an extended rally, though it also received positive momentum from German and French growth data, along with more SNB comments. Zurbruegg said the CHF was still too high and followed weekend comments from Danthine, who reiterated that the CHF cap would remain for the time being. EUR-CHF headed to 1.2426 highs and then eased up as hedge funds and macro names emerged around the highs, leaving the cross just in front of 1.2400. The EUR-CHF upturn lifted USD-CHF over 0.9360. The dollar pairing has benefited recently from a series of firmer closes and should maintain a supportive tone.

    [USD, CAD]
    USD-CAD moved over 1.0350 overnight as U.S. yields held up amid expectations of Fed policy tapering. The pick up in USD-CAD slowed into 1.0370 amid fund offers and it reverted to the 1.0350 area. The recent break higher should limit the downside, while stocks in Europe are also struggling to sustain higher levels and this should also benefit long USD-CAD positions.

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