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By XE Market Analysis June 6, 2014 6:56 am
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    XE Market Analysis: North America - Jun 06, 2014

    EUR-USD drifted lower during the London AM session, to 1.3291 after flat-lining around 1.3660 in Asia. EUR-JPY and EUR-GBP declined by a similar magnitude. Some corporate selling was reported to have gone through from around 1.3960 in EUR-USD, which tipped the balance in quite trade ahead of the U.S. jobs report. EUR-CHF selling also contributed. The cross posted a one-month of 1.2166 on Swiss CPI data, which came in above expectations at 0.2% y/y in May from 0.0% in April. This is the highest inflation has been in Switzerland since September 2011, which was the month that the SNB implemented the franc limit peg as a means to counter exchange rate induced deflation. USD-JPY dipped to a four-day low of 102.23. Japan's leading indicator for April came in at 106.6, up on the median forecast of 106.1, but to little market impact. AUD-USD edged out an 18-day high above 0.9350, with the Aussie benefitting from higher stock markets on the ECB stimulus measures, while a World Bank report said that there are signs of improvement in the Chinese economy.

    [EUR, USD]
    EUR-USD drifted lower during the London AM session, to 1.3291 after flat-lining around 1.3660 in Asia. EUR-JPY and EUR-GBP declined by a similar magnitude. Some corporate selling was reported to have gone through from around 1.3960 in EUR-USD, which tipped the balance in quite trade ahead of the U.S. jobs report. EUR-CHF selling also contributed. The cross posted a one-month of 1.2166 on Swiss CPI data, which came in above expectations at 0.2% y/y in May from 0.0% in April. We expect the euro to remain under pressure and recommend selling in to gains. The ECB's actions were broad and, importantly, left the door open to QE, as Draghi announced that there is to be an intensification of preparations for this course of policy. Meanwhile, we expect the U.S. payrolls report to be dollar supportive, so we favour shorting the euro against the greenback. Key resistance levels in EUR-USD are marked at 1.3660 (the 20-day moving average)and 1.3670 (yesterday's peak), ahead of 1.3700, which we consider a key risk level for bears.

    [USD, JPY]
    USD-JPY dipped to a four-day low of 102.23. Japan's leading indicator for April came in at 106.6, up on the median forecast of 106.1, but to little market impact. Stock markets were generally higher in Asia, welcoming the ECB stimulus, though the Nikkei finished near flat. 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]
    Cable rebounded Thursday on the coattail of EUR-USD's post-ECB sell-off rally. We think the risk is to the downside in Cable as today's U.S. jobs report is likely to be robust, with a 225k headline expected but with recent claims and survey data pointing to upside risks. Key resistance in Cable is marked at 1.6824 (Thursday's peak), support at 1.6784-1.6800 (which encompasses both the 20- and 50-day moving averages). Support is at 1.6789-11.6800. Meanwhile, we favour shorting EUR-GBP given the contrasting ECB and BoE positions.

    [USD, CHF]
    EUR-CHF has been pressed to a three-week low as markets repositioned into and after the ECB easing measures on Thursday, which tilted the balance between ECB and SNB policy. We also heard in market talk mention of the news that the G7 is to impose harder-hitting sanctions on Russia is if fails to help restore stability in Ukraine, which may have inspired to a safe haven bid. The low in EUR-CHF so far has been 1.2166. 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. 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 has been in a correction/consolidation phase since late January following a four-month rally period from sub-0.9700 levels. A moderate bear trend had started to emerge, but the still-dovish outlook for BoC policy seemed to be put a limit on the CAD's upside. We expect a choppy, sideways bias in USD-CAD.

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