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By XE Market Analysis December 6, 2013 7:00 am
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    XE Market Analysis: North America - Dec 06, 2013

    EUR-USD has been consolidating Thursday's gains into U.S. jobs data, which is a major focus for global markets given the bearing it will have on Fed tapering expectations. USD-JPY traded moderately higher, having triggered light stops through 102.00 on the back of a burst of demand at the Tokyo fixing today. GBP-USD posted a 50 pip rally to its peak of 1.6370, which made GBP-JPY a star performer, following very strong house price data which served to revive the bullish sterling view following Wednesday's services PMI disappointment. EUR-GBP gave back about half of the post-ECB press conference gain in ebbing to the 0.8350-60 area. AUD-USD tried to decline following S&P's downgrade of Qantas, which has followed a series of bearish Aussie leads this week, but there was little impetus to follow through and the pair recovered to the 0.9060 area from its 0.9036 low.

    [EUR, USD]
    EUR-USD has been consolidating yesterday's gains into U.S. jobs data, which is a major focus for global markets given the bearing will have for Fed tapering expectations. The pair is presently within a few pips of yesterday's New York closing level of 1.3663, having posted a narrow 1.3650-1.3675 range in the interim. Market participants are looking for a 200k+ headline print today (judging by various media reports we have seen) after the strong ADP jobs report yesterday, which is above the economist median of 180k. This view is reflected in the OANDA open positions monitor, which is showing that its clients (retail level speculative traders) are holding a 27% long and 73% short ratio in EUR-USD. If this is any guide, a sub-200k outcome in today's jobs headline might trigger a burst of short coving in EUR-USD, which in the event could send the pair on its way to the Oct-31 high of 1.3715. We are expecting a sub-consensus 170k outcome.

    [USD, JPY]
    USD-JPY recovered from a six-day low of 101.62, tripping a light round of buy stops through the 102.00 level. The bounce in the Nikkei stock index, after a fairy hefty losses over the last two days, helped return pressure on the yen, which is apt to correlate inversely with stock markets. Initial resistance comes in at 102.25 and the 200-hour moving average comes in at 102.40. Good support is now seen at 101.50-62. We see upside risk at today's U.S. jobs report, given the outcomes of various component data, which in the event would likely be a negative for USD-JPY on the back of consequent risk aversion. We would therefor favour shorting in the pair in the 102.20-40 zone.

    [GBP, USD]
    Sterling has been bid since Halifax house price release, which revealed a stronger than expected 1.1% m/m surge for a 7.7% y/y gain in the three months to November. Strength in the residential housing market brings with it strong multiplier effects to the broader economy, so today's data has reinforced the bullish fundamental view of the pound. Cable recovered above 1.6360, gaining just over 40 pips on the London opening level. EUR-GBP has given back about half of the post-ECB press conference gain in ebbing to the 0.8350-60 area. Prior to this move, sterling had consolidated lower following the sub-expectations November services PMI on Wednesday, which offset the very strong construction and manufacturing PMI releases from earlier in the week. However, it should be stressed that the services PMI, at 60.0, still reflects robust expansion and Q4 GDP is still, we think, headed for 1.0%-plus q/q growth, which would be one of the highest growth rates currently in the OECD group. We continue to target Cable to 1.6500.

    [USD, CHF]
    The CHF has been well bid this week, making a one-month peak versus the USD and a two-month high against the EUR, and we expect more of the same. The rekindled U.S. Fed tapering view as proven supportive for the safe haven Swiss currency, as this backdrop has elicited risk aversion in global markets. We also anticipate a firm U.S. jobs report today, which in the event should strengthen the possibility of the Fed commencing a tapering program as soon as this month. USD-CHF is technically looking bearish, breaching below the support of a three-week bear channel, and now targeting 0.8960 after achieving our former target of 0.8960. EUR-CHF punched below range of the last month in the 1.2280-1.2300 region, but still remains above SNB intervention danger levels.

    [USD, CAD]
    USD-CAD has settled to consolidation after the strong rally extended to a new major-trend high of 1.0707 on Wednesday following the BoC announcement and statement. The BoC had emphasized the downside risks to inflation. The pair looks to have become a bit overstretched, though a footing was found at 1.0625-30 yesterday. Good offers are now reported around 1.0700-10. Employment data is due out of both the U.S. and Canada today. We expect the former to have bigger impact, and a strong outcome, which is the risk given signals from already known component data, may put the CAD under pressure should a risk-off them take hold as markets cement Fed tapering.

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