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By XE Market Analysis September 11, 2013 6:51 am
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    XE Market Analysis: North America - Sep 11, 2013

    GBP was the main mover in Europe as U.K. employment data came in much stronger than expected. Hedge funds that positioned for the upside from 1.5730 ahead of the release booked profit after it hit 1.5827 highs and it ended the European morning close to 1.5760, leaving it moderately firmer intra-day. It was a muted session otherwise. JPY and CHF were weaker in Asia after U.S. President Obama confirmed that the U.S. will pursue the diplomatic route on Syria. In Europe, profit taking set in and there was no appetite to chase the market. EUR failed to test 1.3300 for the third consecutive day and consolidated ahead of 1.3250. The commodity bloc held firm on risk appetite, leaving AUD at 0.9300 and USD-CAD close to 1.0330.

    [EUR, USD]
    EUR-USD ranges remained narrow overnight. It headed higher on the back of strength in EUR-JPY and EUR-CHF. However, after edging up from 1.3265 to 1.3280 it stalled for the third consecutive session and drifted back below 1.3250 by the European open. There are still buyers on dips as stale short positions cut back amid a more positive short term technical backdrop after 1.3100 held last week. On top, there are very large offers in place ahead of 1.3300 and apart from a reduction in stale short positions there is still no appetite to build long positions currently. This could be the case until next week when the impetus will come from the FOMC outcome. There are option expiries at 1.3250 and 1.3300 there are rolling off today and this could compound today's consolidation.

    [USD, JPY]
    USD-JPY consolidated following a pullback from fresh trend highs close to 100.60 in Asia. The recent rise in risk appetite reinforced yen selling and there was positive traction from the upturn in U.S. yields. Strong resistance at 100.65 put a top in place and a minor correction weighed into the Tokyo close. European names are dip buyers into 100.20 and more bids are tipped at 100.00, where large option expiries are due to roll off today. Progress on the topside should remain slow due to the presence of more option positioning, which has left the market long of gamma. However, the uptrend in USD-JPY is looking more sustainable than it has done since early August.

    [GBP, USD]
    Cable rifled higher as U.K. employment data beat expectations by a fairly wide margin. Hedge fund demand ahead of the release fueled speculation that the number would come out on the strong side. The claimant count tumbled by 32.6k and the ILO unemployment rate eased a notch to 7.7%. Cable rallied from 1.5770 to 1.5827 highs immediately on the release and then pulled back to 1.5760 on profit taking. EUR-GBP fell from 0.8425-30 ahead of the release and filled in last week's lows to trade at trend lows of 0.8383, but reclaimed 0.8400 on large corporate bids and short covering. The number will see BoE Carney's forward policy guidance come under increased scrutiny at tomorrow's Treasury Select Committee, though the broad based improvement in the U.K. economy will be welcomed. Ahead of Thursday consolidation could set in.

    [USD, CHF]
    CHF consolidated losses as the risk appetite persisted, with stocks in Asia and Europe mostly higher. EUR-CHF extended the recent rally to trade into 1.2415, but good resistance from corporate offers into 1.2420 capped. USD-CHF continued to dance around the 200-dma near 0.9350 as dollar heaviness was absorbed by cross-flows. GBP-CHF was the standout mover due to U.K. employment strength and it surged to 1.4784 highs and then pulled back to 1.4730 on decent profit taking activity. Bank flow reports have tipped a marked pick up in CHF selling over the last week and positioning may be a little excessive currently. This may result in more sideways action and EUR-CHF and USD-CHF may start to narrow up.

    [USD, CAD]
    USD-CAD's downside came under pressure over the course of the European morning. USD consolidated on the lower side and the commodity bloc currencies were supported by the recent improvement in broader market sentiment. This triggered USD-CAD sell-interest from the 1.0365 area in early Europe and it threatened 1.0330 ahead of the North American open. Corporate buying interest was prevalent around yesterday's 1.0331 lows and we expect more of the same today. However, the better risk backdrop could leave USD-CAD vulnerable if support at 1.0315 and 1.0300 gives way. Stop and reverse positions are building through 1.0290, which is just under August-15 lows of 1.0294. Selling into strength is favoured in the short-term.

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