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By XE Market Analysis November 19, 2013 6:00 am
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    XE Market Analysis: North America - Nov 19, 2013

    The dollar maintained a holding pattern overall. There was a brief period of price chop that led to kneejerk dollar selling after a MNI interview with PBoC Governor Zhou, though moves were not sustained. Zhou said China will move forward with market liberalisation, which will mean an end to FX intervention, wider yuan trading bands and eventually a floating currency. Zhou did not offer any timeline though and his remarks were in response to questions on China's future rather than an official statement from Beijing. During the furore EUR spiked from 1.3500 to 1.3545 and then retraced the move to 1.3495. AUD jumped from 0.9400 towards 0.9450 and then eased into 0.9410. Elsewhere, Cable marked time close to 1.6100 for a large part of the session and USD-JPY consolidated under 100.00. Macro developments included a rise in German ZEW to the best levels since October 2009. The OECD lowered the 2014 world GDP forecast to 3.6% from 4.0% previously. It raised the U.S. GDP outlook to 2.9% from 2.8% and cut Eurozone growth estimates to 1.0% from 1.1% previously.

    [EUR, USD]
    EUR-USD is trading close to 1.3500 after it failed to sustain higher levels. The German ZEW reached the highest levels since October 2009 at 54.6, which was better than expected, but the current conditions index fell to 28.7 from 29.7 previously. The early spike to 1.3545 was on PBoC comments on CNY liberalisation, though on further investigation the MNI story covered comments from an interview rather than an official policy announcement by Beijing. EUR-USD is trading near 1.3490 expiries, where over EUR 1 bln plain vanilla strikes are due to roll off and is widely expected to keep prices narrow until the N.Y. cut. The short term trend is still fueling demand on dips, with buy orders layered from 1.3490 to 1.3470, while sellers are still fading moves ahead of stops from 1.3550-60.

    [USD, JPY]
    USD-JPY was weighed by general dollar selling, leaving it near 99.70. A MNI interview with PBoC Governor Zhou on liberalisation of China markets triggered kneejerk dollar selling, though it did not offer any timeline on potential changes to the way China operates and saw the dollar steady. Japanese banks out of Tokyo report heavy dollar bids from U.S. funds, which are protecting sell stops below 99.50, while there is also very large expiries at 99.50-60 and 100.00 that could also provide support.

    [GBP, USD]
    Cable is consolidating close to 1.6100, where good size option expiries are due to roll off today. There are a lack of domestic influences on GBP today, leaving the impetus on risk assets and other currency pairs. EUR-GBP is still looking towards higher levels after fund names lifted it towards 0.8400 yesterday, where it remains today. This has held Cable back to a degree, along with an overhang of offers from 1.6130 to 1.6150. An Asian sovereign capped its advance on Monday and there is no appetite to threaten higher levels today. GBP still has good potential on the upside this week though. The BoE minutes are due tomorrow and should echo the BoE's more optimistic outlook, which was revealed in the BoE Inflation Report last week. There is also CBI monthly trends data due on Thursday.

    [USD, CHF]
    EUR-CHF traded on a stable to firmer footing, leaving it near 1.2330. Equity markets were more mixed today, but the recent bout of risk appetite has kept the cross underpinned, while USD-CHF has found stability ahead of 0.9100 following its pulled back from over 0.9200 early last week. The recent improvement in market sentiment and swissy selling came after dovish remarks by U.S. Fed Chairperson-designate, Yellen. This will be good news for Swiss policymakers given the renewed drop in CPI and PPI numbers into negative territory, developments which in themselves will maintain the SNB's commitment for ultra-loose monetary policy and its currency cap. EUR-CHF resistance is marked at 1.2360 and 1.2375 (the Oct-15 high). Trend support, which has been establishing during the recovery from the late-September lows, comes in ahead of 1.2300. However, we'll need to seen risk appetite hold up if EUR-CHF is to recover the 1.2400 handle.

    [USD, CAD]
    USD-CAD followed the greenback's general trend lower on Monday, with the pairing touching intra day lows near 1.0415. However, a thick layer of buying interest was noted at 1.0400, and this put a floor under the pairing. Corporate types had been sidelined with the pairing brushing around 1.0500 last week, though were now in a better buying mood into 1.0400. The pairing made its way back to 1.0445-50 during the European morning from the 1.0415 region.

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