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By XE Market Analysis March 14, 2018 7:20 am
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    XE Market Analysis: North America - Mar 14, 2018

    The dollar has traded mixed so far today, weakening to a four-session low versus the euro before rebounding, maintaining a heavy tone against the yen, and posting fresh lows versus a number of Asian currencies and the South African rand. A risk-off theme prevailed Asia, before U.S equity index futures turned moderately higher and European equity markets rebounded from early weakness. Reuters reported that the Trump administration is set to slap tariffs targeting $60 bln worth of Chinese imports of tech and telecom goods, which meant with renewed rhetorical pushback from top China and EU officials. In data, Chinese industrial production beat forecasts, while Eurozone production data missed expectations.

    [EUR, USD]
    EUR-USD has ebbed back amid a broader euro dip, taking the pair to an intraday low of 1.2361 after earlier logging a four-session high at 1.2412. EUR-JPY, EUR-GBP and other euro crosses have similar take a southward turn. Sub-forecast Eurozone industrial production data, with the January figure contracting 1.0% m/m versus the median for a 0.2% decline, added to euro selling impetus. In the bigger view, EUR-USD has remains mired at midway levels of a range that's been seen since late January, which marks a consolidative phase after rallying out of sub-1.1600 levels that were seen last November. Support is at 1.2275.

    [USD, JPY]
    USD-JPY has remain heavy, settling around 106.50 after a short-lived lift to an intraday high at 106.74 ahead of the Tokyo fixing earlier. Broader dollar softness is at play, with market narratives pointing to political uncertainty following Trump's dual sackings of his foreign secretary, Tillerson, and an aide, John McEntee -- the latter over alleged "serious financial crimes." The yen has been trading mixed in narrow ranges versus other currencies. BoJ Governor Kuroda maintained his recent recommitment to a dovish script, saying earlier that a withdrawal from stimulus is not being considered as the 2% inflation target remains far from being achieved. The BoJ released the minutes from the January policy meeting, though to little market impact given their rear view nature (given that the central bank releases a summary sheet a week after policy meetings, and given the timeliness of recent BoJ member testimonies and communications). In data, Japan's core machinery orders rebound by 8.2% m/m in January after a 9.3% contraction in the month prior. The data is volatile month-to-month and tends not to carry much market-impacting potential, as proved the case today.

    [GBP, USD]
    The pound has posted gains versus the dollar and yen over the last day while holding relatively steady against the euro. Brexit-related noise continues apace, though without producing clear directional leads. The EU leaders' summit on March 22nd-23rd is the next key date, which will be the venue where the EU 27 will look to sign off on group guidelines on forming a future trading deal with the UK. The EU's chief Brexit negotiator, Barnier, warned yesterday that the British government's red lines will "close many doors" for the UK with regard to a post-Brexit trading deal. Cable has been trading without concerted direction over the last month, and is presently near the midway point of the range that's been seen over this period. Support is at 1.3880-82.

    [USD, CHF]
    EUR-CHF has been upwardly mobile since late February, clocking a six-week high at 1.1741 last Thursday. The break higher has tracked a broader rebound in the common currency, with markets finding some relief as the new political picture starts to emerge following the Italian election on Sunday. While the results were messy, and brought Eurosceptic parties to the fore, the general view is that neither the euro or the EU will face an existential crisis. The EUR-CHF cross, which rallied some 10% from mid last year, has been emblematic of the euro's recovery over the last year, with the franc unwinding latent safe haven premium as existential uncertainties under the Eurozone and EU come off the boil. Former resistance is at 1.1563-65 now reverts as support.

    [USD, CAD]
    USD-CAD has this week lifted to the mid-to-upper 1.29s from lows near 1.2800. BoC Governor Poloz said yesterday that unwinding of monetary stimulus would "remain cautious," along with softer oil prices, have pushed the Canadian dollar lower. Signs that Trump will expanding his tariff list is also a potential bearish consideration for the Loonie. We also anticipate that upcoming Canadian data releases will be consistent with the BoC's slow-go approach to policy normalization. Manufacturing shipments (due Friday) are expected to fall 1.0% in January (m/m, sa) after the 0.3% dip in December, with our projection driven by the 2.1% tumble in export values revealed in the January trade report. Q4 net worth (up tomorrow) will be closely watched as the report contains the debt-to-disposable income ratio. The ratio saw a record high 171.1% in Q3, and could move even higher in Q4 to underpin the elevated degree of sensitivity household have to higher interest rates. USD-CAD technically remains in an uptrend, which has been in play since late January. Trend support comes in at 1.2830.

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