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By XE Market Analysis August 28, 2013 6:41 am
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    XE Market Analysis: North America - Aug 28, 2013

    European markets traded quietly as market participants eyed developments surrounding Syria. In Asia, price action was dominated by more emerging market pressure, which weighed on the commodity bloc currencies and boosted JPY. In Europe, profit taking activity went through. USD-JPY rebounded from 96.80 to 97.50, which underpinned the crosses and the commodity bloc currencies improved. AUD-USD edged up from 0.8900 to 0.8930 and USD-CAD firmed up from 1.0470 to 1.0510. GBP remained heavy ahead of today's speech by BoE Governor Carney, which is expected to back the BoE's policy stance. EUR continued to trade within a very tight range on varying cross-currents and month-end activity.

    [EUR, USD]
    EUR-USD traded in a very tight range. Overnight movement into the 1.3400 region continued to meet sovereign supply on upticks. There was no impact from Eurozone M3 data, which was highlighted by a downturn in lending. The downside is being stymied by a pick up in EUR-JPY since late Asia, though EUR-CHF remains heavy. EUR-GBP is still holding up as London traders await today's speech from Carney. Direct flows going into EUR-USD are still fairly limited. Tuesday's downturn in U.S. yields is a supportive factor, but month end is expected to see net dollar inflows, which suggests more range-bound action.

    [USD, JPY]
    USD-JPY posted a modest recovery since late Asia. The dollar pairing met strong support ahead of 96.80 overnight and entered the European session back above 97.00. The pick up in USD-JPY extended to the 97.50 region and was in tandem with demand for the JPY crosses and a modest recovery in European stocks. There was speculation in the Middle Eastern press that Assad may have left Syria for Iran, though Western leaders are still working out a timetable for potential action against Syria. USD-JPY should still meet selling pressure on upticks as market psychology has shifted in favour of defensive positions. Offers are noted towards 97.80 and 98.00. EUR-JPY has rebounded out of 129.70 to 130.50, but fund names should also begin to fade this rally due to a lack of speculative activity.

    [GBP, USD]
    GBP is trading on the heavy side as market participants await today's speech from BoE Governor Carney, which is due just after the N.Y. open. Cable moved under 1.5500 after it came under selling pressure from the 1.5540-50 area in Asia and fell from 1.5530 after the European open. Fund names have been selling on upticks in preparation for dovish remarks today. However, sovereign buyers are likely to buy dips into the 1.5440-50 area and 1.5400. Carney is expected to defend the BoE's policy stance today, but may also mention the rise in market rates. If he does not specifically address the recent rise sterling could see knee-jerk gains.

    [USD, CHF]
    CHF is holding steady on risk aversion. Global equity market losses since the start of the week reinforced a move back into the CHF, leaving EUR-CHF under 1.2300 and USD-CHF under 0.9200. Further demand for the CHF is being absorbed by profit taking activity. EUR-CHF has met good demand into 1.2280 since the early part of last week from Swiss names, while USD-CHF buyers are noted into the 0.9150 region. The cross is expected to meet strong support on further weakness, with the 1.2200 level intact since early May. USD-CHF may have more downside potential amid a weaker technical backdrop and falling U.S. yields, which are being impacted by a pick up in Treasury demand.

    [USD, CAD]
    USD-CAD is trading close to 1.0500 after it experienced a correction over Tuesday's North American session. Offers ahead of 1.0550 put a top in place and it headed back to the 1.0470 area. Stop losses were a factor on the way down and sources tipped very heavy real money demand for CAD$. Movement in Asia was driven by equity market moves and CAD$ drifted lower in line with stocks, which suffered on risk aversion. CAD-JPY also came under pressure from Japanese interest and this was a supportive factor for the dollar pairing. In Europe, a very narrow range was noted as stocks posted a modest recovery, but are still well down on the weak.

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