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By XE Market Analysis June 28, 2013 2:11 pm
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    XE Market Analysis: North America - Jun 28, 2013

    It was a fairly low key session in Europe. There were mixed leads from equity markets. Asian markets performed well due to yesterday's strong U.S. data, dovish Fed policy rhetoric and more supportive words on liquidity from PBoC Governor Zhou. In Europe stocks dipped, which was pinned on profit taking and month-end/quarter-end repositioning. Similar flows were influential in FX. The EUR crosses were underpinned on seasonal flows, but EUR-USD was capped by dollar support on dips. USD-JPY held a tight range close to 99.00 amid strong Japanese data overnight, large flows related to investment trust launches and risk appetite.

    [EUR, USD]
    EUR-USD traded a tight range. Month-end/quarter-end resulted in mixed flows and limited EUR-USD price action. Demand for EUR-JPY, EUR-GBP and EUR-CHF was absorbed by dollar supportive flows. In early Europe, EUR-USD pulled back from 1.3075 as large offers at 1.3080 capped. However, good bids into the 1.3030-40 restricted the downside ahead of larger bids into 1.3000. There was no impact from overnight reports that ECB could consider QE and central bank officials moved quickly to quash speculation.

    [USD, JPY]
    USD-JPY consolidated overnight gains, leaving it just shy of 99.00. Light profit taking into the European open fueled a move off highs just over 99.00 back into 98.65, where good bids were noted. Both JPY selling and USD buying is tipped for today's quarter-end fix, leaving bias firmly on the upside. There is quite a lot of resistance to consider for USD-JPY longs as several large barriers were placed at 100.00 after the correction from highs of 103.73 in mid-May to 93.60 lows by mid-June. Ahead of 100.00 there is technical resistance at 99.05 ahead of 99.10 buy stops. Previous highs of 99.29 and 99.47 have also fueled offers from Japanese exporters.

    [GBP, USD]
    GBP was guided lower by seasonal flows. Cable topped out around 1.5280 after the European open and headed back towards 1.5230 amid EUR-GBP demand. A sovereign name was reportedly a buyer for the third consecutive session related to usual month-end related demand, which helped it into the 0.8570 region. There are standing offers from 0.8570 to 0.8600, which should limit upside momentum. EUR is also see tentative selling against the USD on quarter-end related demand, while natural support in Cable is widely tipped from 1.5200 to 1.5180.

    [USD, CHF]
    EUR-CHF edged up through offers at 1.2350 into the N.Y. open, before month end backed selling stepped in. The Swiss KOF leading indicator pointed to further improvement in the Swiss economy despite coming in a bit weaker than market expectations. The CHF continued to underperform amid ongoing momentum fund activity. USD-CHF headed back towards the 0.9470 area from the 0.9430 region at the European open. Dip buying has persisted since USD-CHF broke up through the 100-dma on Wednesday. EUR-CHF posted a strong gain on Thursday amid solid Swiss demand. London sources said EUR-CHF has had more potential to rally now that one large fund name had finished unwinding a position related to emerging market exposure.

    [USD, CAD]
    USD-CAD briefly tested the 1.0500 region on Thursday and also spent more time around this area in Asia as quarter-end related short covering underpinned. Further gains were limited though after an impressive Asian market rally, which offered positive guidance for early European names. USD-CAD turned away from this region and headed back towards 1.0450. However, there are short term dollar buy orders into this region and remaining order flow at 1.0425-30 from earlier in the week. Equity markets should guide action, but it looks as if quarter-end activity will be heavier than usual after heavy risk-related moves in June.

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