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By XE Market Analysis July 24, 2013 6:45 am
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    XE Market Analysis: North America - Jul 24, 2013

    Risk appetite improved in Europe after a poor session in Asia. Today's focus was on PMI data. HSBC's flash reading for China hit an eleven month low and former PBoC Xia Bin said China has signs of a crisis. In contrast, Eurozone data beat expectations on a better than expected reading from France and strong numbers from Germany. This elevated EUR across the board, which weighed on USD, JPY and CHF. Cable tried and failed to clear 1.5400 on EUR-GBP strength. AUD pulled back from 0.9300 in Asia and plunged below 0.9200 in Europe as macro funds traded it as a proxy for China.

    [EUR, USD]
    EUR-USD found support under 1.3200 and headed higher as PMI data from France and Germany came in on the firmer side. China PMI data overnight gave the dollar a small lift, but the technical backdrop provided support. EUR took off from 1.3210 and filled 1.3250 offers with ease as Eurozone data points to economic recovery. German data was particularly strong and the French readings will also be welcomed at a time where the growth outlook has been in the domestic press. EUR eyes the June 20 peak at 1.3268 and 1.3300, where another round of buy stops are anticipated.

    [USD, JPY]
    USD-JPY cleared 100.00 as Eurozone PMI data beat expectations. The composite reading moved above 50 for the first time since January 2012 on strength in the German reading, which buoyed EUR-JPY. The cross was boosted from just under 132.00 to 132.40 and enabled USD-JPY to absorb selling pressure from 99.80 to 100.00. There are more Japanese orders into yesterday's top at 100.20, which are protecting stops at 100.20-25 and more are noted at 100.50. The underlying tone for USD-JPY has been positive since it corrected on Monday as profit taking went through after the Upper House election victory for the LDP.

    [GBP, USD]
    GBP experienced another session of consolidation on further topside failure. Cable came under a bit of pressure in Asia on China data weakness and an early move was noted back through 1.5350. Follow through was contained and Eurozone PMI data strength lifted it back to 1.5390, where very strong offers were noted on Tuesday. Cable's upside was very limited though due to short covering in EUR-GBP from 0.8590 through 0.8625, which left Cable under 1.5350 late on in the European morning. There was no impact from the U.K. CBI Industrial Trends Survey, which added to evidence of a U.K. economic recovery. Price action in Cable supports the view that it may be close to a near-term top and downside pressure could build.

    [USD, CHF]
    EUR-CHF traded over 1.2400 for the first time in just over a week. EUR-CHF was boosted from 1.2360 area on EUR strength amid upbeat Eurozone PMI data. EUR tripped stops at 1.2400 and reached 1.2403. EUR-CHF movement in recent session is supportive after it rebounded out of 1.2320 on Monday and cleared 1.2400 today. There are congestion of offers into 1.2420 that is keeping a round of buy stops intact. If these are cleared away then it will reinforce upside movement. Meanwhile, the EUR-USD upturn forced USD-CHF from 0.9375 to 0.9340 initially but fund demand for EUR-CHF lifted it back to 0.9370. USD-CHF has also found persistent demand on dips since it was unable to sustain a move under the 200-dma on Monday.

    [USD, CAD]
    USD-CAD topped out just over 1.0310 in early Europe. It received a lift overnight from the 1.0278 area as risk aversion steepened on further evidence that China is slowing down. However, in Europe the tone changed as Eurozone PMI data beat expectations on strength in both German manufacturing and services. USD-CAD headed back below 1.0300 and extended through 1.0290. With stocks on the front foot USD-CAD may revisit yesterday's lows and could challenge modest support from June 20 lows at 1.0268.

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