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By XE Market Analysis June 27, 2014 7:18 am
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    XE Market Analysis: North America - Jun 27, 2014

    The USD was mixed, down against a generally firmer yen that was underpinned by Japanese data, near net unchanged versus the EUR, and up verus the AUD, which corrected some of the recent gains. USD-CAD, meanwhile, dipped to a fresh six-month low at 1.0677 before recovering to the 1.0690-95 area. USD-JPY broke below recent lows and clocked a one-month low at 101.31 during the Tokyo session. The 200-day moving average at 101.71 was breached on route. Japanese data were net supportive of the yen too: fiscal 2013 tax revenue beat the government estimate, May CPI rose to 3.7% from 3.4%, retail sales increased 4.6% m/m, beating expectations for 2.9%, and unemployment dipped to 3.5% from 3.6%. Elsewhere, sterling was little affected by U.K. GDP, with final Q1 data confirming the 0.8% q/q initial estimates, though the y/y figure was revised lower to 3.0% from 3.1%. Cable was near net unchanged in the late London AM from pre-data release levels at 1.0725 bid, after earlier carvingn out a one-week high at 1.0751 before turning lower, leaving last week's major trend peak at 1.7063 unchallenged.

    [EUR, USD]
    EUR-USD slumped back toward the 1.3600 level after failing to sustain gains to the 1.3620-30. Yesterday's "ECB sources" report that even lower rates might be tolerated in the Eurozone, illustrates the contrasting dovish stance for the Eurozone central bank relative to the Fed and others. Yesterday's low at 1.3575 is initial support. We are bearish as there is sufficient contrast between the Fed and ECB policy stances. Key EUR-USD resistance at 1.3650-51 and 1.3672-77, the latter levels of which encompass the 200-day moving average and the Jun-6 peak.

    [USD, JPY]
    USD-JPY broke below recent lows and clocked a one-month low at 101.31 during the Tokyo session. The 200-day moving average at 101.71 was breached on route. Japanese data were net supportive of the yen too: fiscal 2013 tax revenue beat the government estimate, May CPI rose to 3.7% from 3.4%, retail sales increased 4.6% m/m, beating expectations for 2.9%, and unemployment dipped to 3.5% from 3.6%. Elsewhere, sterling was little affected by U.K. GDP, with final Q1 data confirming the 0.8% q/q initial estimates, though the y/y figure was revised lower to 3.0% from 3.1%. 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 little affected by U.K. GDP, with final Q1 data confirming the 0.8% q/q initial estimates, though the y/y figure was revised lower. The breakdown showed a downward revision to service sector growth, but this was offset by an upward revision to business investment, to 5.0% from the 2.7% previously estimated, which will be pleasing to policymakers as it reflects a progression to more sustainable economic expansion. Cable is near net unchanged from pre-data release levels at 1.0725 bid presently, which is also near to net unchanged on the day. The pound earlier carved out a one-week high at 1.0751 before turning lower, leaving last week's major trend peak at 1.7063 unchallenged. EUR-GBP also held at near net unchanged levels, around 0.7995-0.8000. We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. Last week's major-trend peak at 1.7063 provides an initial target in Cable, while a big-picture Fibonacci retracement level at 1.7330, which is a 50% retracement level of the 2007 to 2009 decline, offers a longer-term target. Our EUR-GBP target is provided by the crosses major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF remains biased lower as the situation in Iraq and Ukraine enriches the franc's safe-haven premium. The cross on Thursday touched last week's low at 1.2152, which is a one-month low. 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, but so far have remain 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 made a fresh six-month low under 1.0700. The pair breached below the 200-day moving average at 1.0783 earlier in the week and has been trending lower since. The move reflects a broad dollar-bloc bid that was sparked by much stronger than expected PMI data out of China and Japan, which has underpinned the commodity-correlating currencies. USD-CAD had last week breached May lows at 1.0814-1.0822 in the wake of the dovish FOMC announcement. The main caveat is the still-dovish outlook for BoC policy, which should put a limit on the CAD's upside at some point.

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