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By XE Market Analysis July 4, 2014 7:56 am
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    XE Market Analysis: North America - Jul 04, 2014

    EUR-USD came under fresh pressure, breaching yesterday's 1.3596 low and clocking a new one-week low of 1.3587 so far. The pair is once again declined concomitantly with a fresh widening in T-note v Bund yield differentials, which has pressed to a new cycle wide toward 137 bp, now over 10 bp up on levels seen earlier in the week. The failed breach of the 200-day moving average this week and the subsequent breach of support at 1.3600-05, which encompassed the 20-day moving average at 1.3604, has reaffirmed strongly bearish technical credentials. Sterling ebbed amid profit taking in quite pre-weekend trade in London, with the market selling into Asia session gains to 1.7179, a move that stalled one pip shy of Wednesday's six-year peak. USD-JPY corrected a portion of yesterday's post-U.S. jobs gains, and capped a three-day rally by ebbing back to the 102.00 area. Japanese exporters were reported sellers, making the most of the two-week high levels. AUD-USD consolidated slightly higher, in the 0.9350-60s, after yesterday's post-RBA Stevens speech losses..

    [EUR, USD]
    EUR-USD remains on a downward path, extending yesterday's post-payrolls roll in the London AM session today to bring the Jun-26 low at 1.3575 into scope. Aside from possible pre-weekend short covering in a quiet market, without the U.S. out today, we don't expect too much let up in the bearish trend. Market analysts have started to revise Fed expectations in the wakes of the jobs report (Barclays, for instance, now thinks Fed hikes are closer), while Eurozone two-year yields hit record lows after Draghi added further details about the TLTRO program after leaving the door open for further action yesterday, and German 1-year yields remain below zero. We expect EUR-USD to eventually move in on the May low at 1.3503.

    [USD, JPY]
    USD-JPY corrected a portion of yesterday's post-U.S. jobs gains, and capped a three-day rally by ebbing back to the 102.00 area. Japanese exporters were reported sellers, making the most of the two-week high levels. Bigger picture, USD-JPY remains entrenched amid a broad sideways range, roughly contained within 100.00-105.00, which has been in place since early January. This stasis may persist for some time yet, though technical analysts will be marking this as a potential topping formation after the steep rally from levels around 75.0 that was seen during the second part of last year.

    [GBP, USD]
    Sterling has ebbed amid profit taking in quite pre-weekend trade in London, with the market selling into Asia session gains to 1.7179, a move that stalled one pip shy of Wednesday's six-year peak. There are no fresh data or leads, while the new low in EUR-USD helped weigh Cable selling, though EUR-GBP also gained after the cross clocked a fresh 20-month low. Trading activity should tail of quickly today with U.S. markets closed. We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. The BoE's stance has been backed-up by a solid PMI report for June. Although the composite PMI ebbed to a three-month low of 58.4 from 59.1 in May, this is also still a high level, consistent with Q2 GDP growth of 0.8% q/q. BoE's Bean said over the weekend that market expectations of a rise in interest rates at the turn of the year are "reasonable." A big-picture Fibonacci retracement level at 1.7330, which is a 50% retracement level of the 2007 to 2009 decline, provides bulls with a target. Our EUR-GBP target is provided by the major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF breached 1.2150 this week and extended to a 1.2133 three-and-a-half month low, as the situations in Iraq and Ukraine continues to underpin the Swiss currency's safe-haven premium. Technically, the break of a former uptrend channel support line at 1.2190 opened the way to the mid-1.21s. The cycle low of 1.2104 and 1.2100 are key support levels, so far remaining unchallenged. 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 clocked a new six-month low at 1.0620 on Thursday, which was the sixth consecutive lower low on the daily chart. The pair breached below the 200-day moving average at 1.0783 last week and has been trending lower since. The move reflects a broad dollar-bloc bid that was initially sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies as investors adjust a more optimistic world outlook. The BoC is also under pressure to reconsider its dovish policy stance. Resistance is pegged at 1.6996 (last Friday's high) and 1.0700. Former congestion around 1.0580-1.0600 is support.

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