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By XE Market Analysis September 19, 2013 6:30 am
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    XE Market Analysis: North America - Sep 19, 2013

    The dollar added further to post-Fed losses in Europe. Currencies that were most sensitive to the revival in risk appetite outperformed. The commodity bloc currencies were buoyant, leaving AUD over 0.9500 and USD-CAD under 1.0300 as Nymex crude held above $108 and gold was supported ahead of $1360. EUR-USD carved out highs over 1.3565 as EUR-JPY hit multi-year highs over 134.00. Japanese accounts were massive buyers of carry trades and this enabled USD-JPY to rebound from under 98.00 in Asia back to 99.00 by late on in the European morning. GBP's upside got a reality check as U.K. retail sales unexpectedly fell in August, but the CBI industrial trends survey was much stronger than expected. The CHF did not react to the unchanged SNB policy and the Norges Bank also left rates unchanged at 1.5%.

    [EUR, USD]
    EUR-USD edged out trend highs after the European open. It consolidated yesterday's post-Fed gains and was on a firm footing at both the start of the Asia and European session. Option defensive sellers capped for a time overnight, but very heavy EUR-JPY demand from retail accounts and macro names boosted EUR-USD over 1.3565. Momentum is firmly with the topside amid the dramatic shift through 1.3500 and the slump in U.S. yields has the market gearing up for a move on 2013 highs recorded on February-1 at 1.3710. Buyers are anticipated towards 1.3500 and there are order book bids at 1.3480 and 1.3450-60.

    [USD, JPY]
    JPY slumped as Fed revived risk appetite. USD-JPY took off since the London open and filled in close-to-market offers from 98.50 to 98.80 as demand for the JPY crosses soared, leaving it near 99.00. EUR-JPY extended to three-and-a-half year highs over 134.00, which compares with Asia Pacific opening levels around 132.35 and pre-Fed levels at 132.00. Retail interest was heavy out of Tokyo and CTA stops triggered demand in the dollar pairing. The pick up in USD-JPY limited upside potential in the other dollar majors, though EUR, GBP and AUD maintained a buy on dips mentality throughout. USD-JPY's upside could slow if U.S. yields remain upwardly challenged in the U.S. session, though for now yen-funded carry trade interest is driving flows.

    [GBP, USD]
    GBP fell on weak U.K. retail sales data. August retail sales fell 0.9% on the month compared with a market median of +0.3%, leaving the year-on-year rate at 2.1%. The number is the first U.K. release for some time that came in on the weaker side. Cable dropped from 1.6130 to 1.6080 and EUR-GBP extended the overnight recovery to trade from 0.8400 to 0.8435. The number provided GBP with a much needed correction, though we anticipate good demand on dips, particularly after yesterday's less dovish policy stance in the September BoE minutes. There was also another strong data release as the U.K. CBI industrial trend survey came in at +9 in September from 0 previously. We anticipate Cable buyers towards the 1.6050 region, while EUR-GBP should run into offers on the approach of 0.8450.

    [USD, CHF]
    SNB's policy hand barely registered on the CHF, which maintained stable to firmer levels after yesterday's unchanged policy decision forced USD-CHF back into the 0.9100 region. The SNB left policy unchanged, which included the EUR-CHF lower limit at 1.2000. It continued to highlight potential risks to the outlook, though acknowledged that growth was doing better than it previously forecast. The Swiss government also upgraded its 2013 growth forecast to 1.8% from 1.4% previously and the 2014 GDP outlook was raised to 2.3% from 2.1% previously. This is in line with SNB's 2013 growth forecast of 1.5%-2.0% from 1.0%-1.5% previously. EUR-CHF should benefit from a rise in risk appetite, though USD-CHF may be at risk of further stop loss selling.

    [USD, CAD]
    USD-CAD broke 1.0200 option barriers by early Europe as a rise in risk appetite and the dovish Fed tone weighed heavily on the dollar pairing. USD-CAD posted small recovery from 1.0202 to 1.0233 in early Asia, but upticks were sold into. A downward bias should remain for the time being, though some corporates could take advantage of the weakest levels since June-19 and support is noted into 1.0175.

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