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By XE Market Analysis August 15, 2014 6:28 am
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    XE Market Analysis: North America - Aug 15, 2014

    The dollar weathered a brief dip during the European AM session in fairly lacklustre summertime trading conditions. EUR-USD has sunk back to the 1.3365 area after lifting a peak of 1.3391, turning shy of resistance comes at 1.3407-15 (which marks both yesterday's and Wednesday's peaks). A news report that Lithuania's foreign minister saying that he has hears that Russia shipped military equipment into Ukraine last night has weighted on the euro. Cable rose to a high of 1.6700 following an unexpected revision higher in U.K. Q2 GDP to 3.2% y/y from 3.1%, though subsequently ebbed back to near net unchanged levels. USD-JPY, meanwhile, rallied above 120.60 following a report that the BoJ is considering revising down its GDP forecasts, though the pair had remained shy of yesterday's 10-day peak at 102.66 at the time of writing. AUD-USD managed to extended to an eight-day peak of 0.9334, a move which tallies with the continuing rebound in stocks and risk appetite.

    [EUR, USD]
    EUR-USD has sunk back to the 1.3365 area after lifting a peak of 1.3391, turning shy of resistance comes at 1.3407-15 (which marks both yesterday's and Wednesday's peaks). A news report that Lithuania's foreign minister saying that he has hears that Russia shipped military equipment into Ukraine last night has weighted on the euro. The double rejection from 1.34-plus levels over the last two days, meanwhile, affirms that technically bearish tone is persisting. We continue to anticipate an eventual test of 1.3000 given the divergent paths of the ECB and the Fed and underlying economies.

    [USD, JPY]
    USD-JPY recovered the 102.50 handle though has remained shy of yesterday's 102.66 peak. Data and news has continued to be yen bearish. Bloomberg reported that the BoJ officials are considering cutting growth forecast for FY 2014, "according to people familiar with the central bank's discussions." Japan economy minister Amari also said that it was too early to say that deflation has been beaten, and the JGB 10-year benchmark yield dipped below 0.50% for the first time in 16 months. USD-JPY has this week breached above the 200-day moving average at 102.46, and we are looking for a weekly close above here to affirm bullish credentials. Support is now marked here, ahead of 102.17-20 and 102.00-10 (which encompasses the 100-day moving average). One uncertainty for a bearish yen view is the geopolitical situations in the Mideast and Ukraine, as any significant worsening would likely prompt yen gains.
    .

    [GBP, USD]
    Cable has been consolidating in the upper 1.66s after the steep drop to a two-month low at 1.6657 The pound gave back gains seen on an above-expectations GDP revision, with Cable now back at the 1.6690 area after clocking a 1.6700 high. U.K. Q2 GDP was revised up to 3.2% y/y from 3.1% in the second estimate release, while the q/q figure remained unrevised at 0.8%. This was the best y/y performance since late 2007 and the ONS stats office said the revision was due to stronger than initially forecast construction activity. However, with data this week showing wage inflation in June having dipped for the first time since 2009, the GDP won't change the BoE's wait-and-see-stance with regard to the timing of a rate hike. The BoE in its latest Inflation Report sharply cut its estimate of the equilibrium unemployment rate (the rate at which the jobless rate stops weighing on wages) to 5.5% from 6.25%. The jobless rate is currently running at 6.4%. Cable resistance is marked at 1.6700, 1.6725, and 1.6766 (last week's low).

    [USD, CHF]
    EUR-CHF remains heavy, pressing to a new five-month low below 1.2120. The cycle low at 1.2104 and 1.2100 are key support levels now. We would expect that the threat of SNB intervention into its 1.2000 peg to deter franc buying below 1.2100. SNB's Jordan repeated recently that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD has breached below last week's low at 1.0903 and 1.0900, which is another affirmation of an evolving bearish bias. Last Friday's rally had stalled a few pips shy of the Aug-6 three-month peak at 1.0986, leaving the 1.1000 level untroubled and painting a less bullish technical picture following a two-week rally phase. The recent oscillations within 1.0900-1.1000 is looking like a double top formation, which signals reversal potential to 1.0800. Key support is marked by a confluence of the 20-, 100- and 200-day moving averages, contained within 1.0860-1.0870.

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