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Subdued Market Braces for EURO Inflation

FX markets in Asia ended in a subdued fashion content to remain in established trading ranges. Traders are bracing themselves for the EUROZONE Inflation Expectations which are due out in less than half an hour (7 pm Sydney). EUROZONE CPI flash estimate is forecast to remain at 0.3 %, the same as the previous report.

The EURO which managed to rally on limited short-covering to 1.3221 last night, edged down in slow Asian trade to end at 1.3172. Overall trading range for the Single Currency was 1.3161-1.3186.

The YEN meantime maintained its strength vis-a-vis the EURO and other currencies. Against the USD, the range for DOLLAR YEN was 103.65-87, closing the Asian session at 103.85. Slighter weaker Japanese data supporting the Greenback although rising tensions in the Ukraine will keep a lid on DOLLAR YEN, with any further tensions causing the YEN to correct back to 103.00.

AUSSIE and KIWI were both content to stay on the sidelines. The KIWI which was sold initially on weaker ANZ Kiwi Business confidence rallied to close at 0.8390 with a low of 0.8357.
The AUSSIE DOLLAR traded a narrow 0.9346-0.9362 range supported by continued demand due to its relatively high yields.

Meantime EUR/CHF stayed close to its 1.2050 support level, the range for EUR/CHF was 1.2055-1.2066. Major support is at 1.2020 30. Any dip toward 1.2000 will see the Swiss National Bank act to support the EUR/CHF cross. The SNB have defended the 1.2000 since they introduced it in 2011. With Swiss inflation at 0% and international reserves at record highs, expect the SNB to act and take on all comers.

The SNB have been successful in their defense of the cross and from this trader’s experience, not about to take them on.
Instead preferring to go with them ……

See EUR/CHF Daily Chart below ..

Add a long weekend in the US and Canada to the mix, and we have possible “fireworks” in the making. An ideal way to start the silly September season.
Brace yourselves and good luck to all ..

These are our initial impressions only, please make sure you read all disclaimers on this website carefully. If you would like to discuss further, please feel free to contact me on the details below.

Mike Moran
Director, Institutional Sales
Phone: 02 8036 7564

Friday, 29 Aug, 2014 / 9:09

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