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By XE Market Analysis November 20, 2013 5:52 am
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    XE Market Analysis: North America - Nov 20, 2013

    The dollar eased overnight as Fed Chairman Bernanke maintained his commitment to policy accommodation in a speech after the N.Y. close. Kneejerk dollar selling in early Asia lifted EUR towards 1.3580 and USD-JPY dipped just under 100.00, though prices backed up over the course of the session and the dollar was fairly stable in Europe. GBP experienced a mini shakeout over the BoE MPC minutes, but there were no fresh insights and Cable rose from 1.6115 back over 1.6150. USD-JPY was hemmed in by more option expiry congestion between 100.00 and 99.50 in several yards and AUD marked time close to 0.9400 after RBA's Debelle talked down the currency in Asia. Elsewhere, PBoC Vice Governor Hu pledged to reform rates and FX following yesterday's roadmap that was revealed by Governor Zhou to MNI.

    [EUR, USD]
    EUR-USD consolidated after it was unable to sustain higher levels overnight. EUR-USD jumped to 1.3579 highs overnight as Bernanke maintained his commitment to policy accommodation in a speech made after the N.Y. close. EUR selling picked up a gear near the highs, with fund names tipped, along with option accounts and it headed back to 1.3515-20 amid European and U.S. account sales ahead of 1.3550 after the European open. The downside is still being limited by a decent congestion of bids and the daily chart is also supportive still. However, progress in either direction is being restricted as Fed policy speak competes with recent ECB comments. Large option expiries at 1.3500 and 1.3465 are due to roll off, along with small interest layered into 1.3530, which could hold prices back into the N.Y. open.

    [USD, JPY]
    USD-JPY benefited on GPIF panel recommendations that called for a rise in the foreign asset ratio. USD-JPY jumped from 99.90 to 100.15 on the headlines, but has since headed back to the 99.90 region amid option related selling. There are outstanding option strikes around 100.40-50, though the larger interest is near 99.50 in excess of USD 3 bln and should reinforce the current consolidation pattern in USD-JPY. EUR-JPY, which has been a positive leader for USD-JPY, is also consolidating after an overnight rally on 135.95 met option protective sellers ahead of 136.00, leaving it at 135.25, with risk to the downside on the hourly chart.

    [GBP, USD]
    GBP dipped over the BoE MPC minutes. Cable topped out near 1.6150 and moved into 1.6115. The minutes revealed a 9-0 vote for unchanged policy, which was in line with expectations. The potential for fresh insight was very low into the release less than a week after the BoE Inflation Report. The BoE expected growth to pick up in the near-term amid an improvement in household spending and housing, while conditions for business investment have also improved. However, it noted that growth risks were still skewed to the downside and the external environment was unlikely to aid growth, citing Eurozone as a risk. It anticipated a fall in inflation in the near-term and then a rise towards year-end, while employment was expected to fall in the next three months. After the mini shakeout in GBP buying interest should continue to support on dips. Bids are seen at 1.6100-10 and then 1.6090 to 1.6060 ahead of sell stops through 1.6050.

    [USD, CHF]
    EUR-CHF drifted into the 1.2315-20 area as EUR-USD was unable to sustain overnight gains and USD-CHF remained on the heavy side near 0.9100. Despite the recent dovish comments from Fed's Yellen and Bernanke, risk assets have been narrowly mixed today and this has provided the CHF with a modicum of support. For the most part, activity in the swissy has been uneventful since the SNB warned that it was digesting the impact from the recent ECB rate cut. This has been enough to deter heavier demand for the CHF and it looks like this theme will continue in the near-term.

    [USD, CAD]
    USD-CAD remained supported on dips. Buyers overnight were noted ahead of 1.0450 after it moved up to 1.0485 on Tuesday. The consolidative tone at higher levels bodes well for further gains and there may be an eventual test of offers at 1.0500 and then stops at 1.0520.

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