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By XE Market Analysis July 22, 2013 6:51 am
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    XE Market Analysis: North America - Jul 22, 2013

    The dollar was softer overall. In Asia, USD-JPY profit taking stood out after longs cut positions as the LDP secured a majority in the Upper House as expected. In Europe, activity was extremely low again, but Cable stop loss buying featured above 1.5300 and dragged EUR-USD up to the 1.3190 area. Risk appetite was positive in Europe as pressure on Portugal eased despite the government failing to reach an agreement on the salvation pact. The government got backing though from the president, who ruled out a snap election. The G20 pledged to put growth before austerity in order to revive the global economy. However, China's vice premier reiterated that focus was on reforming the economy rather than stimulus, with focus on the quality of growth and restructuring. He said policies would be fine tuned when necessary, though.

    [EUR, USD]
    EUR-USD posted modest gains. Risk appetite rose in Europe as the pressure on Portugal eased. The government talks on the salvation pact broke down, but the president voiced confidence in the government and ruled an early election, which weighed on 10-year yields. For the most part, EUR traded a tight range, but gained positive traction after on-going demand for Cable on dips triggered a stop hunt above 1.5300 and this fueled follow through demand for EUR to 1.3190. The 1.3200 region is expected to meet very good sell-interest from real money and sovereigns that were active last week and the week before. However, the technical backdrop is increasingly pointing to a topside push and buy stops at 1.3210 are at risk.

    [USD, JPY]
    USD-JPY consolidated close to 100.00 since it corrected lower overnight on profit taking. Speculative positioning was cut back after the as-expected LDP election victory over the weekend. The long-term outlook is still for the Nikkei to sustain higher levels and a pick up in USD-JPY, but details of structural reform plans announced by PM Abe in June will not be detailed until September and this has capped follow through demand for now. Dip buying is still likely in the near-term based on the technical backdrop and the interest rate outlook. However, on an intra-day basis it looks like large option expiries at 99.80, 100.00 and 100.50 will keep ranges tight again.

    [GBP, USD]
    Cable is on the firmer side as dollar losses in Asia kept it within reach of the 1.5300 level. Stocks in Europe are also higher, which helped the risk backdrop and persistent bid interest eventually lifted it to through 1.5330. Liquidity was thin on the way up, according to sources and this may have exacerbated the move. EUR-GBP could add traction to the move if very large sell stops are successfully targeted from 0.8590. London sources said on Friday that there are a cascade of sell stops there are layered through 0.8590 to the 0.8560 region.

    [USD, CHF]
    EUR-CHF is trading close to the 1.2370 area after it struggled to sustain higher levels late last week. The limited upside was due to USD-CHF moves. The dollar pairing came under pressure amid a rise in risk appetite, which was fueled by USD-JPY weakness in Asia and Cable buy stops in Europe. USD-CHF has been mildly positive since it bounced from the 200-dma last Wednesday around 0.9360, but it has looked vulnerable today. Swiss participants noted news from UBS and Julius Baer, which announced strong net inflows in its latest results. There was no reaction after SNB chief Jordan said he has no intention of changing or scrapping the EUR-CHF floor at 1.2000. The comments were made on the sidelines of the weekend G20 meeting.

    [USD, CAD]
    USD-CAD broke support at 1.0350 late on in the European morning amid a rise in risk appetite and the firm commodity market backdrop. USD-CAD downside momentum is likely to be on the slow side into 1.0325, where buyers were tipped late last week and the 1.0300 area is also where good local names bids are widely anticipated. USD-CAD sellers are noted from the 1.0370 region and 1.0400 is also a good area for short positions currently, with offers from the middle of last week being lowered to more realistic levels.

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