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By XE Market Analysis November 26, 2013 6:15 am
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    XE Market Analysis: North America - Nov 26, 2013

    The European morning was quiet with the exception of position adjustment as the market slows down into the U.S. Thanksgiving holiday. Usually there is a pick up in dollar demand as funds close books ahead of the year-end. However, the USD has stormed higher in recent weeks against JPY and held firm against the commodity bloc, which could potentially dampen scope for further dollar upside this week. Intra-day accounts fished for stops in EUR-USD and forced highs just over 1.3570 and then it fell back. USD-JPY drifted lower as 102.00 barriers capped on Monday. Cable was supported on dips following Monday's retracement from 1.6240 to 1.6135. BoE Governor Carney and MPC members indicated that it would not be swayed by short term improvements in the U.K. economy and looked for a sustained improvement in productivity.

    [EUR, USD]
    EUR-USD's bias was with the topside. USD-JPY's easier tone provided a modicum of support, along with supportive comments for the EUR from PBoC Governor Zhou in overnight trade. Market leads were lacking as interest slowed down ahead of the U.S. Thanksgiving holiday. Thin trading conditions exacerbated an early stop hunt above 1.3555 and it carved out intra-day highs of 1.3571 and then selling set in. There was more dovish ECB speak from Coeure, who repeated that cutting the deposit rate is an option. ECB officials have been vocal since the ECB cut rates, but EUR has not sustained lower levels and looks poised to threaten 1.3600 in due course.

    [USD, JPY]
    USD-JPY drifted lower from the European open as Japanese names lowered offers to 101.75 overnight as 102.00 barriers capped on Monday. The downturn in USD-JPY coincided with a minor correction in the Nikkei and after the recent gains sideways to lower action may be seen into the U.S. holiday. Most of the expiry risk in this week is focused around 101.75, though there are smaller maturities under 101.00 that could feature if long liquidation accelerated. Further dollar selling should meet natural demand into 101.30 and 101.00-10. Under 101.00 orders are on the thin side until 100.60 to 100.35.

    [GBP, USD]
    GBP is narrowly mixed today. Cable threatened the downside early on following yesterday's correction ahead of key resistance at 1.6250-60 to 1.6135. Some longs booked profit after the decent run higher, though tentative buying interest returned today as the dollar eased a touch. EUR-GBP was supported by EUR-USD's brief run higher and it traded into 0.8380. There was no market moving comments from the BoE. Carney welcomed the improvement in employment, but added that the forecast is not materially altered by one month's data. Carney said the U.K. economy is picking up sharply, adding that businesses have benefited in the knowledge that the MPC won't tighten policy now. Dale said if inflation expectations started to rise it would respond. However, Carney, Bean and Dale and all cited uncertainty over productivity, which suggests they will remain patient on policy despite the marked improvement in activity.

    [USD, CHF]
    EUR-CHF regained its poise as Swiss names took advantage of the brief move under 1.2300 last Friday and it traded back into 1.2330. Follow through thereafter was limited though and it trades a tight range just in front of 1.2300 as offers capped in Asia. In recent months when EUR-CHF has traded under 1.2300 SNB board members have talked up the cross. This was the case again yesterday when SNB's Jordan reminded the market after the European close that it is prepared to buy unlimited FX to defend the franc cap and it will remain in place as long as it needed. Jordan said from today's view there is no need to drop the cap and it does not rule out using other measures and will keep all options open. The SNB may have felt it necessary to make a hint on policy after the pick up in ECB rhetoric, which has included talk of negative deposit rates.

    [USD, CAD]
    USD-CAD peaked at trend highs of 1.0583 on Monday, just shy of the July 8 peak of 1.0585. A move over 1.0609 would take the pairing to better than 2 year highs, where 1.0657 was posted in October of 2011. In the meantime however, defense of 1.0600 barrier options is expected, though stops are noted at 1.0610. Canada's cool-ish CPI data release on Friday continued to weigh on the CAD, while weaker oil prices in the wake of the Iran deal has kept support under USD-CAD. However, a moderation by recent longs did see the pairing ease toward 1.0525 overnight.

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