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By XE Market Analysis February 10, 2014 6:52 am
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    XE Market Analysis: North America - Feb 10, 2014

    EUR-USD tested 1.3650, which was the highest level seen since Jan-29 as the euro extended the gains seen following last Thursday's ECB unchanged policy announcement and Friday's U.S. jobs report disappointment. The pair subsequently drifted back to the 1.3625-30 area, with good selling interest reported in the 1.3650-60 area. USD-JPY drifted lower after logging a 10-day peak of 102.65 during the Asia session. EUR-JPY saw the same price action. There had been good Japanese corporate demand for USD-JPY had been seen ahead of tomorrow's public holiday and due to today being a "gotobi" day, though when this demand having abated, USD-JPY drifted lower. Data today showed Japan's current account deficit hit a fresh monthly record of Y638.6 bln, driven by a surge in the import bill for foreign energy products due to the combined effect of yen weakness and the closure of nuclear power plants. AUD-USD drifted below Friday's low to 0.8927 as the Aussie corrected after the strong gains that were seen last week and ahead of a key data and event week in Australia. Moody' stated that there was no "imminent threat" its AAA rating of Australian sovereign debt.

    [EUR, USD]
    EUR-USD was quickly turned lower after testing 1.3650, which was the highest level seen since Jan-29. This extended the gains seen following last Thursday's ECB unchanged policy announcement and Friday's U.S. jobs report disappointment. The bigger picture technical picture has shifted to more neutral than bearish following the recovery above the 20- and 50-day moving averages, and the break above a six-week bearish trend line, though there are reports of decent selling interest into 1.3650-60 and again into 1.3688-1.3700. Support comes in at 1.3595-1.3600, which encompasses the 20-day moving average. We still prefer selling into strength as we think there will be a growing focus on the possibility of the ECB taking further easing measures at its March meeting, while we expect the Fed to remain on its tapering course.

    [USD, JPY]
    USD-JPY has drifted lower after logging a 10-day peak of 102.65 during the Asia session. EUR-JPY has been seeing the same price action. Market commentaries report that Japanese corporate demand for USD-JPY had been seen ahead of tomorrow's public holiday and due to today being a "gotobi" day (a date that is devisable by five, which is traditionally when most business payments are made in Japan). With this demand having abated, USD-JPY has drifted lower. Data today showed Japan's current account deficit hit a fresh monthly record of Y638.6 bln, driven by a surge in the import bill for foreign energy products due to the combined effect of yen weakness and the closure of nuclear power plants. USD-JPY support comes in 102.00 and 101.80, resistance at 102.65-102.80.

    [GBP, USD]
    Cable's technical picture remains tentatively bearish. The recovery above 1.6400 was short lived, and the bigger picture still look heavy following the double rejection from forays above 1.6600 in late January and the subsequent breach (and continued hold below) of both the 20- and 50-day moving averages. We continue to target a return to the 1.6200-1.6220 area. Resistance is marked in the region of 1.6400-1.6440, which encompasses a cluster of former daily highs and lows, and the 50-day moving average.

    [USD, CHF]
    EUR-CHF edged out a 10-day high of 1.2250 as the Swiss currency unwinds some of its safe haven premium. The cross had been flirting with 1.2200 amid the backdrop of risk aversion in global markets, though the steadying in stock markets has lent the cross some support. The Dec-17 cycle low of 1.2167 has now fallen out of scope. SNB-speak last week affirmed that a removal of the 1.20 limit would only be considered if inflation was much higher had little impact. We wouldn't advise speculative accounts to hold long CHF exposures below 1.2100 given the threat of SNB intervention ahead of 1.2000.

    [USD, CAD]
    USD-CAD price action looks to be confirming the development of a topping formation. The recent run to a five-week peak of 1.1224 came with declining bullish momentum, which was a sign that the underlying trend was weakening. The breach and hold below of a series of consolidation lows in the 1.1030-1.1050 region (now resistance) strengthens the bearish case. The apparent head-and-shoulders pattern that was formed between late January and early February carries a projection target to 1.0800-1.0820. Key resistance is marked at 1.1100, ahead of 1.1175 and 1.1200.

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