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By XE Market Analysis October 9, 2013 6:29 am
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    XE Market Analysis: North America - Oct 09, 2013

    The dollar traded on the firmer side in Asia and demand accelerated in Europe. Overnight, news that Yellen will be nominated later today as Fed Chair triggered a USD-JPY rebound out of 96.80 to 97.45 as risk appetite improved, which also fed a USD-CHF rally. EUR-CHF moved into the 200-dma near 1.2310 after USD-CHF moved up from 0.9015 to 0.9110. The stalemate in Washington D.C. continued to fuel uncertainty though and this was an early EUR-USD driver as rising dollar funding costs triggered a fall to 1.3515 after it stalled over 1.3600 in Asia. GBP corrected lower amid very disappointing industrial and manufacturing production numbers, which left Cable under 1.6000. Meanwhile, German industrial production came in at 1.4% m/m and was upwardly revised to -1.1% m/m from -1.7% previously, which provided the EUR with a modicum of support.

    [EUR, USD]
    EUR-USD met a sovereign influence near 1.3520 as the dollar upturn ran out of steam ahead of the N.Y. open. There was better action via EUR-USD today compared with other sessions as the early focus came from USD funding concerns. This is not a major issue yet, but was a trigger for short term European accounts after good offers capped from 1.3600 in Asia. Japanese names were also amongst the sellers as 1.3650 and 1.3640 gave way and it extended to 1.3516 lows. There were European corporate bids on the way down, while a stabilisation in equity markets also supported on the periphery as the EUR crosses also saw buyers.

    [USD, JPY]
    USD-JPY started the session under pressure near 96.80 after a weak Wall Street close amid the debt stalemate in Washington. Japanese buyers were prevalent in the 96.70-80 area, which put a floor in place ahead of large outstanding barriers at 96.50. News of the Yellen nomination for Fed Chair boosted sentiment and this helped USD-JPY back through 97.00 to 97.43 highs. On the way up there was offshore account selling and unless there is a breakthrough in U.S. debt negotiations selling into strength will continue in the near-term.

    [GBP, USD]
    GBP slumped after a much weaker than expected U.K. industrial production outturn and a wider than expected August trade deficit. Cable was hovering around the 1.6030 area ahead of the release as a rise in USD demand weighed from the 1.6065 region in early trade. The release extinguished option support and the psychological 1.6000 level to move through 1.5980. The downturn is in line with weakening momentum studies, though long-term money should still see any GBP correction as a buying opportunity given underlying U.K. fundamentals. Cable bids are likely into 1.5950-60, where near-term support is drawn off a series of previous highs in mid-September. More bids are seen at 1.5930-35 and 1.5900.

    [USD, CHF]
    USD-CHF gains lifted EUR-CHF to the 200-dma. Underlying dollar strength has been the standout story in the FX market today and USD-CHF is almost a full figure higher from Asia lows near 0.9015. News that Yellen is to be nominated as the Fed Chair helped sentiment to a degree. EUR-CHF indicated scope for higher levels yesterday when macro names emerged ahead of 1.2250 and it also met buyers from 1.2265 in Asia and broke 1.2300 in Europe. SNB's Jordan did not offer anything new in comments made after yesterday's close, but reiterated the importance of the CHF cap and said it was ready to take further measures if required. Last week when USD-CHF broke the 0.9000 there was speculation of quasi-official bids, which raised conjecture that the SNB may have tried to steady the dollar pairing amid concerns that a sustain dollar drop could destabilise the cross.

    [USD, CAD]
    USD-CAD is on the front foot after it raced up to 1.0370 during Tuesday's North American afternoon session. A rise in risk aversion weighed on the CAD$ and dollar offers between 1.0340 and 1.0360 were cleared away in thin trade. USD-CAD maintained a firm tone overnight and reached 1.0380 as the USD was underpinned after the Yellen news, while fears of a dollar shortage also appeared to be driving short term flows. The 1.0400 level is going to be a near-term pivot point and stops are likely higher up.

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