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By XE Market Analysis July 25, 2013 6:47 am
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    XE Market Analysis: North America - Jul 25, 2013

    The dollar ended the European session on a slightly firmer footing as equity markets fell, which provided light support for JPY and CHF, respectively. The EUR maintained levels close to 1.3200. It only received brief support from German Ifo, which rose slightly. Eurozone M3 growth eased a notch and highlighted weak loan growth. GBP longs booked profit as U.K. Q2 GDP largely met expectations and Cable headed back below 1.5300. There was no reaction overnight from yesterday's mini-stimulus measures announced by China, while a PBoC source reportedly ruled out a cut in the bank reserve ratio requirement.

    [EUR, USD]
    EUR-USD posted knee-jerk gains over the German Ifo. The headline business climate reading rose, but expectations eased slightly. This saw EUR trade up from 1.3215 to 1.3235 and then moved under 1.3200. The bias for EUR is still mildly supportive amid the sloping uptrend on the daily chart since it bottomed out just under 1.3000 on July-15. Hourly studies also point to higher levels since early Asia, though the U.S. yield backdrop is going to pivotal in the near-term after yesterday's price action encouraged dollar gains. Note, real money accounts are still looking to sell EUR into 1.3250-60 and 1.3300.

    [USD, JPY]
    USD-JPY remains positive based on the daily chart and the fundamental backdrop also suggests more dollar upside. However, a heavy congestion of option expiries and the recent pick up in Eurozone and U.K. data weighed against the USD. Strikes close to a yard or so are noted at both 100.50 and 100.00 and forced longs to liquidate as the top of the recent range remained intact on Wednesday and during today's Asia session. An early move on stops saw USD-JPY extend through 99.80, though Japanese names have stemmed the decline and more U.S. fund demand is anticipated on dips.

    [GBP, USD]
    GBP longs booked profit on U.K. Q2 GDP data, which met expectations at 0.6% q/q and 1.4% y/y. Cable traded at 1.5374 highs ahead of the release and then moved under 1.5300. EUR-GBP edged out lows of 0.8590 pre-data and then moved back through 0.8635. However, it is looking vulnerable as EUR is struggling to sustain altitude elsewhere. Cable should hold up based on the improving fundamental backdrop, but recent topside moves have met very strong resistance from 1.5390 and this may indicate a near-term top is building.

    [USD, CHF]
    USD-CHF recovered from the 0.9350 region to trade back into 0.9390 as dollar buying picked up. The improved dollar tone since the European open came as equity markets headed lower on profit taking after a negative lead in Asia. The market shrugged off yesterday's series of small stimulus measures by China and even with relatively firm European data there has been no follow through for risk taking. EUR-CHF continued to consolidate between 1.2350 and 1.2400 amid competing EUR and USD flows. USD-CHF should still meet selling pressure on upticks, but three consecutive closes above 0.9350 and the 200-dma suggests a base may be building.

    [USD, CAD]
    USD-CAD rebounded out of new one-month lows on Wednesday. It traded at 1.0263 at the North American open but has spent most of time thereafter on the front foot as a combination of dollar strength and a downturn in risk appetite weighed. It reached the 1.0325 area by the North American close as trailing stops went through on the break of 1.0310 and 1.0320. Further gains have been limited overnight due to good offers from 1.0330, which were lowered early on in the week.

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