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By XE Market Analysis May 1, 2014 6:47 am
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    XE Market Analysis: North America - May 01, 2014

    Cable logged fresh major-trend highs while and a 20 pip lift in EUR-USD was sufficient to yield a three-week high in thin trade. Many European nations are off for May-1 public holidays, and several Asia centres were also closed for business. Cable rallied to 1.6923 in the wake of stellar manufacturing PMI data out of the U.K., though this was offset by sub-expectations mortgage lending numbers and a particularly disappointing business lending decline, which will cause much chagrin for U.K. policymakers. Sterling subsequently dipped back to the 1.6900 area after the initial post-data pop. EUR-USD stalled around 1.3890 after nudging 20 pips higher in early London trade. The 1.3900 level, reportedly a big option level, was left untested, and so, therefore, were the sizable buy stops reported to be clustered just above 1.3905-10. Elsewhere, USD-JPY consolidated the dollar-driven losses seen in the wake of yesterday's U.S. GDP miss, ranging within 102.10-35. AUD-USD tested the waters above 0.9300, but didn't like the temperature and quickly dipped back to the 0.9280 area.

    [EUR, USD]
    EUR-USD stalled around 1.3890 after nudging 20 pips higher in early London trade. The Apr-13 at 1.3884 was breached, bringing the Apr-12 six-week peak at 1.3905 into the frame. Above here and we have the major-trend high at 1.3966, which was made on Mar-13. Conditions have been illiquid today with many European centres closed, and there are a lack of new leads. The latest leg higher in EUR-USD has partly been driven by a generally softer dollar in the wake of yesterday's U.S. GDP miss, though, as the Fed stated following the FOMC meeting yesterday, the economy should pick-up through the year after weather-affected Q1 conditions. And while the threat of deflation has receded in the Eurozone, low inflation is likely to persist for some time, while weak confidence data suggest the ECB will still implement further stimulus measures -- albeit perhaps not the 'big bazooka' policy effort that was being seen as a possibility.

    [USD, JPY]
    USD-JPY settled around 102.20-30 after dipping to a 102.03 low at the London close yesterday. A 1%-plus rebound in the Nikkei stock index had little impact. USD-JPY's oscillation within the 102s has persisted for over two weeks now. The pair is lacking direction 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, 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. Fundamentals seem more bullish, however, as Fed and BoJ policy paths are likely to become more divergent..

    [GBP, USD]
    Cable made a new-major trend peak of 1.6923 in the wake of the stellar manufacturing PMI data out of the U.K., though this was offset by sub-expectations mortgage lending numbers and a particularly disappointing business lending decline, which will cause much chagrin for U.K. policymakers. Sterling dipped back to the 1.6900 area after the initial post-data pop. We continue to target 1.7000. Anecdotal evidence points to upside risks for the construction PMI release tomorrow, and the services PMI next week should also come in at a robust level.

    [USD, CHF]
    EUR-CHF has settled around 1.2200 again, having recovered from the one-month low of 1.2142 that was earlier in the month. The cycle low of 1.2104 and 1.2100 are considered key support levels. While situation in the Ukraine remains a concern, and a potential supportive factor for the CHF, the threat of SNB intervention into its 1.2000 limit peg is helping to deter franc buying. SNB's Jordan repeated last Friday that the central bank remains committed to defending the currency cap.

    [USD, CAD]
    USD-CAD gave up the chase above 1.1000 and slipped to around 1.0950. There are reports that oil settlement inflows have underpinned the Canadian currency in a relatively illiquid market. There doesn't appear to have been a fundamental driver. The Arp-9 three-month low of 1.0858 now swings back into view. Bigger picture, USD-CAD has been in a consolidation phase since late January following a four-month rally period from sub-0.9700 levels. We'd need to see daily and weekly closes below 1.1000 to support the idea that a trend reversal is on the cards.

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