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By XE Market Analysis June 30, 2014 6:51 am
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    XE Market Analysis: North America - Jun 30, 2014

    The USD traded mixed in quite month- and quarter-end conditions, lower versus the moderately outperforming euro, and firmer against the correcting dollar bloc currencies, and near net unchanged versus the JPY after the Japaneese currency gave back Tokyo-session gains. EUR-USD extended to a new high at 1.3362 following the preliminary June Eurozone inflation figures, even though the flash estimate of HICP came didn't produce the expected tick higher to 0.6% y/y, instead remaining unchanged in June at 0.5% y/y. M3 money supply did, however, unexpectedly accelerate to 1.0% y/y from 0.8% y/y in May, so there was something for the bulls. USD-JPY clocked a six-week low at 101.23 before rebounding toward 102.50. Firmer Japanese and Asian stocks, and sub-forecast Japanese industrial production data, were overlooked as the market focused on USD-JPY's closure on Friday below the 200-day moving average for the first time in the 'Abenomics' era.

    [EUR, USD]
    EUR-USD extended to a new high at 1.3362 following the Eurozone inflation figures, even though the flash estimate of HICP came didn't produce the expected tick higher to 0.6%, instead remaining unchanged in June at 0.5% y/y. M3 money supply did, however, unexpectedly accelerate to 1.0% y/y from 0.8% y/y in May, so there was something for the bulls. There still seems to be a overall bearish view in market talk. The 10-year T-note over Bund yield spread has also pushed back to the 128 bp from sub-127 bp earlier, though we would probably need to see a move beyond 130 bp and into fresh long-term high territory to generate much excitement. Key EUR-USD resistance is marked at 1.3674-77, which encompass the 200-day moving average and the Jun-6 peak.

    [USD, JPY]
    USD-JPY remains heavy with recovery from the earlier six-week low at 101.23 stalling in the 101.40-45 area. Option expiries of vanilla structures with strikes at 101.50 are reportedly coming off this week. USD-JPY has traded lower today despite firmer Japanese and Asian stocks, and sub-forecast Japanese industrial production, which came in at +0.5% m/m in the preliminary estimate, disappointing the median for +0.9%. USD-JPY closed on Friday below the 200-day moving average for the first time in the 'Abenomics' era, which, along with yield differentials, has maintained a bearish tone. 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]
    We remain sterling bullish with the BoE having left the hawkish starting gates ahead of the Fed and ECB. BoE's Bean said over the weekend that market expectations of a rise in interest rates at the turn of the year are "reasonable." 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 major trend lows of July 2012 at 0.7755.

    [USD, CHF]
    EUR-CHF settled in the 1.2150s after logging a fresh trend low at 1.2150 on Friday amid concern about the situations in Iraq and Ukraine, which has been underpinning the Swiss currency's safe-haven premium. 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 steadier after logging fresh six-month low under 1.0662 on Friday. The pair breached below the 200-day moving average at 1.0783 early last 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 as investors adjust a more optimistic world outlook. The BoC is also under pressure to reconsider its dovish policy stance. Resistance is pegged at 1.6996 (Friday's high) and 1.0700.

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