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By XE Market Analysis August 30, 2013 6:46 am
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    XE Market Analysis: North America - Aug 30, 2013

    The dollar held steady as yesterday's better than expected U.S. data kept alive expectations for Fed tapering. The immediate risk of a military strike against Syria was reduced and this weighed on bonds and supported stocks in Asia, but in European momentum was limited. The uncertainty surrounding Syria and the central bank policy outlook reduced leverage positioning and this supported JPY and CHF on dips. EUR traded in a tight range under 1.3250 and Cable was capped over 1.5500 after it closed just under the 200-dma on Thursday. The month ends today with a heavy data slight to digest in North America. U.S. data includes personal income, Chicago ISM and consumer sentiment. In Canada, Q2 GDP is due for release.

    [EUR, USD]
    EUR-USD is still trading a tight range, albeit at lower levels. The EUR extended recent losses in early Europe on residual month-end related demand for USD, which forced an early low of 1.3322. Follow through was limited though as short term range players moved back in, while there was talk that Asian names were now prepared to cut back EUR shorts that were established in recent sessions. EUR-USD headed back over 1.3250 on talk of EUR-GBP month-end activity from 0.8520 to 0.8550. Eurozone data provided a mixed bag. Economic confidence data improved and is in line with the recent pick up in survey data. Unemployment has stabilised at high levels and inflation came down, which will enable the ECB to maintain the dovish policy stance.

    [USD, JPY]
    USD-JPY dipped under 99.00 on option flow and EUR-JPY selling, but there was no follow through and it was net unchanged around 98.25 into the N.Y. open. Japanese names were early sellers following the overnight failure to sustain a move over 98.50. Large 98.00 option expiries exerted an influence, according to sources, while EUR-JPY also met a bout of fund selling amid weaker than expected German retail sales data. The number followed yesterday's unexpected rise in German jobless and soft Eurozone lending data ahead of next week's ECB meeting. USD-JPY risk is still skewed to the topside after yesterday's U.S. data strength and the rebound out of 96.80 on Tuesday. Scope for a break of range looks unlikely though into the weekend.

    [GBP, USD]
    Cable is still trading close to 1.5500. There is scope for softer levels since it broke lower on Tuesday and subsequently posted a marginal close just under the 200-dma yesterday. GBP traders did not react to the BoE Carney interview in the U.K. press, which repeated his desire to tackle a bubble market if needed. However, Cable did edge out lows around 1.5475 from 1.5515 after U.K. mortgage approval data revealed a better than expected 60.6k outturn in July, which is a five year high. Meanwhile, non-resident gilt purchases rose GBP 1.27bln versus June sales of GBP 2.6 bln. This backs up what we have been hearing from our sources that real money have been attracted to U.K. investments due to the BoE's policy stance and evidence of a sustained recovery.

    [USD, CHF]
    EUR-CHF was capped from the 1.2330 area as European stocks gave back opening gains. Appetite is low due to month-end, along with next Monday's holiday in the U.S. and event risks in the latter part of the week. The Swiss KOF leading indicator was positive for the Swiss growth outlook, but there was no direct market impact as the SNB are still expected to maintain the current policy stance, which includes the lower limit in EUR-CHF at 1.2000. EUR-CHF may have further to on the downside today as recent topside failures keep the bias on lower levels. Overall, the cross will remain a range trade until there is a sustained break below the 200-dma around 1.2275-80, which held earlier in the week. USD-CHF is still stable around 0.9300 after it was boosted by month-end flows and strong U.S. data on Thursday.

    [USD, CAD]
    USD-CAD is back on the front foot again after it reclaimed the 1.05 handle on Thursday and then pushed back towards 1.0535-40 by the North American close. The mix of data from either side of the border was supportive on Thursday, while in overnight trade the downturn in oil helped it to edge up through 1.0540. There is resistance into 1.0550 and large stops are building behind 1.0570.

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