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By XE Market Analysis March 10, 2014 6:52 am
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    XE Market Analysis: North America - Mar 10, 2014

    Some chop was seen today, with data disappointments out of China and Japan fuelling a risk-off session in Asia before sentiment recovered poise in the European AM session, which was aided by a flurry of corporate deal announcements and the memory of last Friday's the solid U.S. jobs report. The USD was left on net firmer. USD-JPY rebounded from the sub-103.00 levels that were seen during the Tokyo session, recovering to the 103.35 area. EUR-USD dropped to 1.3870-75 after an early London run higher stalled at 1.3898. The biggest move out of the main currencies was Cable, which dove some 80 pips to a low of 1.6652, which is a six-day low. EUR-GBP concomitantly spiked to a high of 0.8335, which is the weakest sterling has been against the euro since Feb-11. The sell-off of the pound was prompted by news that Vodafone has agreed a preliminary deal of over EUR 7 bln to buy Spanish cable company ONO. Elsewhere, AUD-USD made a four-day low of 0.9023, and EUR-CHF traded slightly high to around 1.2190 after SNB's Jordan said that the central bank remains committed to the 1.2000 limit peg.

    [EUR, USD]
    EUR-USD has been steady in the high 1.38s, consolidating the gains seen following the steep rally from the low 1.37s after the ECB last week upped growth forecasts while announcing that it was refraining from taking further monetary easing following its March meeting. The much better than expected U.S. February jobs report put a lid on the rally, leaving a 29-month high at 1.3915. This level is now marked as a resistance, along with 1.3900. We're not keen on EUR-USD at these levels due to the continuing geopolitical tensions over the Ukraine and the fact that the U.S. jobs data supports the view of the Fed continuing its tapering of QE assets. Support comes in at 1.3850-55 and 1.3825.

    [USD, JPY]
    USD-JPY rebounded from the sub-103.00 levels that were seen during the Tokyo session, recovering to the 103.35 area. The yen continued to exhibit an inverse correlation with stock market direction. Data disappointments out of China and Japan had fuelled a risk-off session in Asia, though sentiment flipped to a risk-on setting in the European AM session, which was aided by a flurry of corporate deal announcements. Bigger picture, there remains muted overall directional impetus in USD-JPY within the 100.00-105.00 range. BoJ policy would favour continued yen weakness, but the threat of China slowdown is an offsetting yen-supportive force, via the possible association of negative consequences on global stock markets given the yen's normal inverse correlation with investor risk appetite. Resistance is marked at 103.45. Support is at 102.50, and 101.00-101.07, the latter of which marks the position of the 200-day moving average.

    [GBP, USD]
    Cable dove some 80 pips to a low of 1.6652, which is a six-day low. EUR-GBP concomitantly spiked to a high of 0.8335, which is the weakest sterling has been against the euro since Feb-11. The sell-off of the pound was prompted by news that Vodafone has agreed a preliminary deal of over EUR 7 bln to buy Spanish cable company ONO. Corporate flows aside, we're haven't been on Cable at these levels and think the rally that's been seen since mid last year is likely over. We think the U.K. recovery will moderate, in part due to the generally firm levels of the pound, while on the U.S. side of the equation, the strong February jobs report supports the view of the Fed continuing its tapering of QE assets.

    [USD, CHF]
    EUR-CHF drifted back under 1.2200 as geopolitical risk remains over the Ukraine, which is returning support to the safe haven franc. This leaves the rebound high at 1.2214, though there remains some distance from the fresh cycle low of 1.2104 that was seen in early March, which is the lowest level since June last year. SNB's Jordan said over the weekend that the central bank would defend the 1.2000 EUR-CHF limit if concerns about Ukraine drove the franc higher. We don't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000. The SNB has signalled that it would only consider removing it if inflation was much higher (CPI dipped back to -0.2% y/y in February).

    [USD, CAD]
    USD-CAD logged a two-week low under 1.1000 last week only to rebound above 1.1100. In the bigger picture, we still think that the pair may be forming a potential double top formation, which for technical analysts is a classic trend reversal pattern. The pair's capping out just shy of 1.1200 on Feb-21 left the late January major trend peak at 1.1224 unchallenged. This price action has been accompanied by a drop in upside momentum, and together these developments point to a possible end of the bullish phase that was seen between October and January, in turn implying potential for a sustained retracement or a period of stasis. Support comes in at 1.1020-25.

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