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By XE Market Analysis December 10, 2014 6:34 am
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    XE Market Analysis: North America - Dec 10, 2014

    USD pairings traded within Tuesday ranges for the most part. There was some intraday chop with liquidity reportedly on the low side as year-end approaches. EUR-USD oscillated between 1.2362 and 1.2398. Several approves to 1.2400 were seen, but all met decent selling. A miss in French production data helped keep a lid on the euro, although European stocks rebounded on the view that yesterday's sell-off on the political concerns in Greece was an overreaction. USD-JPY traded lower during in Tokyo as the Nikkei dove over 2%, making a low at 118.68 before recovering above 119, leaving yesterday's low at 118.59 unchallenged. Expectations that Abe will win this week's election, which would give yen-negative "Abenomics" policies a fresh mandate, should curtail USD-JPY's downside. Cable settled around 1.5675 after some choppy price action. Hawkish remarks from BoE MPC member McCafferty had little lasting impact as he largely repeated arguments that he has been making since August, namely that it would be better to tighten policy earlier but gradually to avoid risk of greater disruptions down the line.

    [EUR, USD]
    EUR-USD oscillated between 1.2362 and 1.2398. Several approves to 1.2400 were seen, but all met decent selling, and yesterday was the second day in a week that the euro had traded above 1.2400 but had failed to make a daily close above here. Political concerns in Greece, and associated worries over its commitment to economic reform, should keep the euro a sell on rallies. We are also bearish on the view of diverging Eurozone and U.S. economic growth, and we look for an eventual make move on the July 2012 low at 1.2042. Resistance is marked at 1.2393-1.2400.

    [USD, JPY]
    USD-JPY made an intraday low at 118.68 in Tokyo trade, subsequently recovering above 119 after leaving yesterday's low at 118.59 unchallenged. Fitch Ratings put Japan's sovereign ratings on Rating Watch Negative (RWN), citing high and rising government debt and increased uncertainty about the authorities' commitment to fiscal consolidation. Fitch said that the RWN would be concluded during the first half of 2015. The move didn't have much impact on the yen as Moody's has recently cut Japan's sovereign rating. We expect the pair to maintain a choppy range, supported on the one had by risk aversion, but undermined, on the other, by expectations that Abe will win this week's election, which would give yen-negative "Abenomics" policies a fresh mandate.

    [GBP, USD]
    Cable has settled around 1.5675 after some choppy price action. Liquidity is reportedly on the low side, as is the case in other currency pairings, as year-end approaches. Hawkish remarks from BoE MPC member McCafferty had little last impact, as he largely repeated arguments that he has been making since August, namely that it would be better to tighten policy earlier but gradually to avoid risk of greater disruptions down the line. News of a drop in the U.K.'s trade deficit also had little impact. We continue to class Cable as being in a bear trend, which has been persisting since the July cycle high at 1.7192, having made new trend lows on Friday and again on Monday. Resistance is at 1.5694-1.5700. The 1.5541 trend low marks support ahead of 1.5500, while the August 2013 low at 1.5102 should be in the crosshairs of bears.

    [USD, CHF]
    EUR-CHF has continued to ply a narrow range around 1.2020, above the rumoured SNB buffer zone between 1.2010 and the 1.2000 franc cap. SNB's Zurbruegg recently pledged that the 1.2000 cap will be defended "with utmost determination" as the bank is prepared to buy an unlimited amount of FX and take further measures immediately if needed. According to more than 60% of respondents of a Bloomberg survey, the SNB will have to use negative interest rates to maintain the cap in the scenario that the ECB commences quantitative easing, while all but one are anticipating the SNB to step up interventions to defend the 1.2000 peg. Bloomberg also cited SNB member Zurbruegg clarifying that negative rates would have a bigger impact in Switzerland than has been the case in the Eurozone as permanent excess liquidity in the Swiss financial system exceeds 300 billion francs.

    [USD, CAD]
    USD-CAD has settled in the upper 1.14s, just off the major-trend high at 1.1476, seen on Friday in the wake of the solid U.S. jobs report. We continue to anticipate a move on 1.1500, and above, with the CAD likely to trend lower on the back of soft oil prices. Support is marked at 1.1400-05.

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