Canadian inflation rates recently met expectations, with only a slight increase observed in the month-on-month rates. However, this is not concerning, as Canada has kept inflation under control, unlike many other Western nations. The Canadian dollar (CAD) has been fairly stable, mostly reacting to the weaker US dollar (USD). The USD/CAD has dropped by about 8 cents since its peak earlier this year.

Moderate Inflation and Interest Rates

Stable inflation may prompt the Bank of Canada to consider lowering interest rates to support slow improvements in the economy. It’s expected that future USD/CAD rates will be more influenced by the weakening USD rather than any strength in the CAD. Recent data shows a sense of calm in Canadian inflation metrics, with most figures matching expectations. While the headline rate rose slightly after seasonal adjustments, it hasn’t raised alarms. There’s no significant surge that would require action from the central bank in the near future. The Bank of Canada is in a more favorable situation than many other central banks, as long-term inflation remains on target. Nevertheless, it’s important to monitor indicators from the labor and housing markets for any signs of persistent upward pressure. In the foreign exchange markets, the CAD hasn’t changed much independently. Fluctuations in its value are primarily due to the US dollar losing strength rather than increased demand for the loonie. This trend aligns with the recent shift in interest rate differentials and overall market sentiment toward a weaker dollar. The current drop of nearly 8 cents in the USD/CAD from earlier peaks illustrates the decreasing demand for the dollar rather than any significant improvement in Canadian fundamentals. With inflation staying stable, the Bank of Canada has the flexibility to maintain a cautiously dovish stance. If domestic growth doesn’t pick up meaningfully in the coming months, further rate cuts remain a possibility. This could influence Canadian yield spreads compared to US rates, reinforcing the softness in the USD/CAD due to broader dollar weakness.

Focus on US Data and Market Adjustments

Traders in derivative markets, particularly those focused on foreign exchange or interest rates, should pay more attention to US data than Canadian developments. For now, we expect inflation differences to remain modest, with the timing of any rate cuts from the Bank of Canada lagging behind those of the Federal Reserve. Therefore, implied volatility for CAD pairs might stay low unless there are unexpected shifts in global risk indicators. We are positioning with an asymmetric view—anticipating a weaker USD, while CAD-specific surprises are unlikely to cause significant price shifts in the short term. Any movement toward pricing in rate cuts by the Fed beyond what’s already in the futures market would bolster long-CAD positions against the USD. However, precise entry points are crucial, as recent tight range-trading has muted short-term trends. Monitoring two-year yield spreads and any unexpected increases in core inflation rates in either country will provide the best risk guidance. Timing is significant not just for major economic announcements but also for changes in forward guidance during policy meetings. The market is gradually recalibrating expectations for Fed actions, which indirectly affects CAD exposures. Currently, no abrupt changes seem imminent, but expectations can shift quickly. Staying vigilant is key. Create your live VT Markets account and start trading now.

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The US Dollar is expected to slightly decline against the Chinese Yuan, but it likely won’t fall below 7.1450. Current trends show a mild buildup of momentum, suggesting that the USD may gradually move toward 7.1450. In the last 24 hours, the USD approached resistance levels at 7.1800 and 7.1900, then dropped to 7.1620. Although there’s no major downward momentum, the USD could still decrease further, with another support level at 7.1550.

USD to Yuan Exchange Predictions

Looking ahead over the next 1-3 weeks, analysts believe that the USD will fluctuate between 7.1620 and 7.2200, having recently tested the 7.1620 level. If it doesn’t break the 7.1950 resistance, the USD might move lower towards 7.1450 soon. It’s essential to do thorough research before making any financial decisions, as investing carries significant risks. The authors aren’t responsible for any errors or losses related to this information. The recent decrease in the Dollar-to-Yuan exchange rate highlights subtle yet significant price movements. Over the past trading day, the USD nearly reached resistance levels of 7.1800 before correcting down to 7.1620. This level has been tested multiple times recently, marking the lower end of the current trading range. While there wasn’t a sharp decline, the price actions hinted at further downward movement if momentum continues even slightly. Analysts are focusing on the upcoming resistance at 7.1950. If the dollar fails to surpass this barrier, it may open the way for a drop towards 7.1450—a level traders should closely monitor. This wouldn’t be a drastic drop but rather a gradual decline due to weakening momentum on the upside. Between the resistance and the recent support at 7.1550, prices are narrowing into a tighter range.

Trading Strategies and Considerations

The expected trading range for the next one to three weeks is between 7.1620 and 7.2200. The dollar is currently near the bottom of this range, and another failure to rise could lead to further declines. While there’s no extreme volatility, the chart shows structure—important for timing trades rather than making risky bets. For those observing derivative flows related to these price movements, this creates clear conditions for strategies. Instead of getting caught up in noise, it’s wise to stay alert to key reaction levels without diving too deep into speculative positions. With strong upper resistance, the downside risk becomes clearer to manage, especially if the 7.1550 support fails. Looking further ahead, forward price indicators might inch closer to 7.1450 if bullish momentum struggles against resistance. The overall message isn’t about drastic changes but rather about gradual adjustments. There’s a market structure in place; patience is needed to allow short-term trends to unfold while maintaining light hedging models for flexibility. Create your live VT Markets account and start trading now.

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Switzerland expects that US tariffs will stay at 10% after July 9 during ongoing talks. This is the current understanding, and any future changes might impact the market. Right now, the market isn’t too worried about the tariffs. While they could affect global growth, many believe that possible rate cuts and government spending will help balance the situation. The belief that US tariffs will remain at 10% after July 9 is shaping current market strategies. If this view changes, we could see significant shifts in stocks, currencies, and interest rates, especially in high-risk positions. For now, expectations are steady. Traders seem to be counting on continued policy support to lessen the effects of external challenges. There is a growing confidence in potential rate cuts and government measures to cushion the impact—particularly in areas more sensitive to trade issues. Recent statements from the government show they’re not keen on escalating tensions right now. This helps keep market volatility low, but we should be careful not to become complacent. Traders interested in derivatives should consider how current pricing reflects these assumptions. Volatility remains low, and option premiums show this calmer trend. There are chances for those willing to plan for broader outcomes, especially in the two-to-three month timeframe. If the market remains tight and consensus holds, gamma strategies might be more effective than usual. We’ve observed that short-term implied volatilities aren’t aligning with historical patterns, which could provide entry points for those seeking gains who want better convexity. From a delta-neutral perspective, skew is understated in several markets, especially in Europe and Asia. This is significant. We need to question whether the optimism about offsetting policy is too high. Although more easing is expected, the speed and effectiveness can’t be guaranteed. There are complexities involved, and often there’s a delay between actions taken and tangible results. Considering this, we take a skeptical view of current risk pricing. The low-volatility environment sets the stage for surprises. Even small dislocations could have larger impacts than models predict due to deep-seated assumptions. Traders should ensure their exposure matches these consensus expectations, especially regarding tail-risk hedging. We’ve been closely watching open interest, which now seems heavily reliant on a stable economic outlook. That might not last. A review of tariff policy—even if it’s delayed—could trigger market reactions where liquidity is lowest. If you’re hedging with spreads or box structures, be clear about your exit strategies. Wider ranges and stronger themes might make vertical structures more effective than straightforward calls or puts, particularly when market makers offer attractive terms on options. In the short term, we prefer instruments with clear downside protection, especially when funded through gains from more stable assets.

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EUR/JPY is currently trading around 168.80 and is aiming for the upper boundary of its rising channel, near 169.20. The 14-day RSI is just below 70, indicating a bullish trend. The primary support is the nine-day EMA, which is at 167.68. The pair has bounced back from previous losses and remains within a bullish ascending channel. A potential upward movement could retest the 169.20 level. If it breaks through, it may head towards the psychological barrier of 170.00.

Short Term Momentum

Short-term momentum is strong, with EUR/JPY above its nine-day EMA. The RSI, close to 70, suggests an overbought risk. Support at the nine-day EMA is at 167.68. If it breaks below, we could see a drop to 166.00, with further support at the 50-day EMA, currently around 164.57. The Euro’s performance varies against major currencies, but it is strongest against the Japanese Yen. The heat map shows percentage changes across various currency pairs, highlighting their respective strengths and weaknesses. This update on EUR/JPY reveals a pair gaining momentum and moving steadily within a rising channel. The current price is near 168.80 and pushing towards the upper boundary around 169.20. The 14-day RSI, just under 70, confirms the market direction while also signaling caution. This suggests that buying interest may be stretched but still has some room before it becomes a concern. Clear support lies at the nine-day EMA, which is at 167.68. The price remains above this level, showing no signs of reversal. Buyers hold strong momentum. Above 169.20, there isn’t much technical resistance until we reach the psychological level of 170.00, which could attract more attention and stronger trading volumes. Such round numbers tend to draw larger participants due to their visibility in trading dashboards.

Recovery and RSI Levels

The recovery from recent losses shows that buyers have returned at favorable levels, strengthening the trend and confirming our observed range. However, with the RSI nearing overbought territory, late entries might face poor reward-to-risk ratios. When considering weekly positions, it’s wise to take partial profits closer to 169.20 while keeping some flexibility for new developments. Momentum is on the side of buyers, but new highs may attract hesitant bids rather than aggressive demand. If the nine-day EMA fails to hold, the next area of interest could be 166.00. Further down, the 50-day EMA near 164.57 serves as a significant line of defense. Sharp movements away from these averages are rare without confirming changes in sentiment, so being disciplined around these levels is crucial. Looking at the overall currency strength through the heat map, the yen underperforms against most currencies, especially the Euro. This gives EUR/JPY its advantage, but it also reminds us to monitor other currency flows, especially given the wide divergence in behavior. Markets seldom maintain a steady pace; when one side of a pair dominates, sharp corrections are common. In the short term, it’s sensible to stay with the trend but gradually shift from quick entries to more thoughtful evaluations. Timing for all setups should be precise, especially for leveraged or intraday trades. Although higher timeframes appear favorable, continuing to monitor key indicators like RSI and EMAs will help us know when momentum shifts from strength to exhaustion, and when support begins to weaken. Create your live VT Markets account and start trading now.

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The UBS investor sentiment in Switzerland improved in June, rising to -2.1 from -22.0. This is the best reading since February. Even with ongoing issues from the Iran-Israel conflict, expectations for growth and inflation have remained steady. Uncertainties around geopolitics and trade policy still exist. The rise from -22.0 to -2.1 suggests that investors in Switzerland are feeling more optimistic, although the sentiment is not yet fully positive. This recovery is stronger than April’s negative outlook and shows that expectations are starting to look better. It indicates a shift in how investors perceive risk, even though overall economic indicators on inflation and growth haven’t changed much. Digging deeper, this improvement means that while investors remain cautious—especially regarding geopolitical tensions and potential trade issues—they are less reactive. The Iran-Israel conflict is still a concern but hasn’t altered long-term growth or inflation predictions. Stability in these expectations encourages investors to adopt less reactive strategies for short-term investments. For those invested in derivatives, this change in sentiment is important for understanding future volatility over the next few weeks. We notice fewer sharp changes in expectations, which can reduce the price fluctuations options traders typically seek. While opportunities still exist, timing and strategy need to adapt more to upcoming data releases and less to sudden geopolitical news. With steady inflation forecasts, implied volatility—particularly in sensitive sectors—may remain stable unless actual data diverges from current expectations. Schlatter’s perspective, reflected in the smoother figures, suggests that major central bank changes are unlikely in the near future. This could narrow calendar spreads and compress premiums on short-term contracts. For us, costs for hedging in index-linked derivatives may ease slightly, though not evenly across sectors due to ongoing political uncertainty that could cause brief spikes. It’s also important to monitor dispersion. While overall sentiment is less negative, different asset groups are reacting differently. Instruments related to trade policy or manufacturing might still show fluctuations. This situation could make relative value strategies more appealing than simply betting on market direction. It’s a good time to reassess risk exposure, especially regarding unpredictable foreign policy areas. Lower headline indicators don’t eliminate the risk of sudden shifts. In summary, while we see improvements, the stability in core expectations may limit how much implied risk premiums can decline. This suggests a cautious approach rather than a drastic change in positioning in the near future. Any adjustments should align with how sentiment translates into actual volatility, rather than making broad adjustments based on macro trends.

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The Euro (EUR) is expected to trade between 1.1575 and 1.1645 against the US Dollar (USD) in the short term. Over a longer period, we think the EUR will stay within a range of 1.1480 to 1.1660 due to more market fluctuations. On Monday, the EUR started lower but rose to close at 1.1576. It hit a high of 1.1641, but its overbought status and slowing momentum suggest limited upward movement. The trading range is likely to remain 1.1575 to 1.1645.

Forecast and Market Expectations

Before, the expected range was 1.1400 to 1.1570, but since it has moved above 1.1570, we now anticipate a range of 1.1480 to 1.1660. There has been some upward movement, but not enough for a sustained increase. If the price breaks above 1.1660, it could lead to further gains above 1.1700. This update includes forward-looking statements that involve risks and uncertainties. It is intended for informational purposes only and should not be seen as trading advice. Always do your research before making financial decisions, as you are responsible for the risks and potential losses. We are witnessing a shift from earlier expectations. The original range of 1.1400 to 1.1570 has changed to a higher range of about 1.1480 to 1.1660. The increase above 1.1570 shows some momentum but is not strong enough for a significant upward trend. Breaks from technical levels like 1.1575 indicate brief bursts of strength. However, a slowing pace and stretched technical indicators limit additional gains. Also, we have observed a minor divergence after the high of 1.1641, suggesting that the current rally is losing strength. For those trading in the short term, the narrow price range between 1.1575 and 1.1645 should not be seen as a lack of opportunity. Quick changes in prices are likely as market positioning adjusts around month-end activities or minor economic triggers. Daily closing prices are gaining importance as technical resistance builds near the upper end of this range.

Key Market Indicators and Potential Scenarios

Analysts see a price move above 1.1660 as a possible turning point. Currently, the chance for movement beyond that level is low but not impossible. If the EUR closes above 1.1660, it would reset expectations toward testing 1.1700 and higher; however, this scenario remains less likely for now. This means that, without a strong reason—such as changes in monetary policy, unexpected data, or external risks—the Euro is unlikely to maintain a clear direction. This situation creates an opportunity for sellers at the top of the range, as upward movements are being limited by technical factors and the broader market sentiment. The price movements are noticeable enough to warrant attention, but they haven’t changed the cautious approach seen in previous sessions. Therefore, if the price goes above 1.1645, it will need to hold that level for confidence to build in a new trend. Based on this structure, we view the lower end of the updated range around 1.1480 as an important level to monitor. Moves toward this level without solid backing are unlikely to last unless there is increased momentum. So far, that hasn’t happened. Instead, it seems that markets prefer trades in the short to medium term, with most traders positioning around familiar levels rather than exploring new territory. Now is not the time to chase prices. The necessary commitment to break out of this range seems to be missing, and current chart patterns support a cautious strategy. It’s also worth noting how market sentiment might change if there is a decisive move above 1.1660. Until then, it’s up to the price to prove itself. Create your live VT Markets account and start trading now.

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Eurostoxx futures have increased by 0.2% in early European trading, indicating a cautious approach for the upcoming session. German DAX futures also rose by 0.2%, while UK FTSE futures remained steady. US futures are mostly stable after a strong day before. With tensions from the Iran-Israel conflict easing, the focus has shifted to other concerns such as President Trump’s tariffs and trade tensions, which may impact the economy and central bank policies.

Market Reaction

The slight rise in Eurostoxx and DAX futures suggests that traders are not rushing into new positions. The unchanged FTSE futures show a lack of strong conviction in the UK market ahead of upcoming domestic data or global events. The stability in US futures, after a strong rally, illustrates that markets often take time to consolidate gains before choosing a new direction. With the Iran-Israel tensions no longer a main concern, traders are now focusing on long-term issues—mainly the trade dynamics from Trump’s tariff plan and its potential impact on monetary policy. Trump’s tariff actions create uneven market expectations. While some sectors may see headline inflation rise due to higher import costs, the overall effect on the economy will depend on retaliatory actions and whether consumers bear these costs. Markets are starting to factor in new assumptions about these developments, which influences interest rate expectations. We’ve been closely monitoring derivatives pricing, noting a subtle shift in implied volatility across equity and rate products. Options are moving away from predictions of drastic rate hikes and trending towards a more stable outlook, indicating that traders believe the central bank will be patient before making further decisions.

Market Considerations

However, it’s important to stay vigilant. Significant disruptions in supply chains or erratic global equity flows could create new downward risks in pricing models. Trading positions should be tighter, more reactive to data, and hedges should be adaptable across delta and gamma. In Germany, Scholz has indicated support for certain stimulus measures, which could lead to higher short-term bund yields and a steeper yield curve if fiscal pressures increase. Meanwhile, the Bank of England has remained quiet, but swaps are now pricing in a slim chance of further rate hikes this quarter. This isn’t a consensus view, but the direction is becoming clearer. Looking ahead, this week has various economic releases. PMI updates in the eurozone will provide insights into industrial output trends and whether sentiment is improving beyond just financial assets. US earnings, especially from international firms, will reveal if margins are holding steady amid tariff uncertainties. We recommend closely monitoring trade-weighted currency shifts—particularly the euro’s performance—since they may influence cross-asset correlations and risk premia models. In our options portfolios, we’ve noticed a decrease in skew, indicating less concern about extreme outcomes for now. Overall, the market appears more balanced right now, albeit still hesitant about direction. In this environment, there’s potential for rewards in short-term strategies and flexibility. We’ve reduced exposure where pricing seems excessive and are focusing on shorter-term roll strategies to maintain agility ahead of the next macro shift. Create your live VT Markets account and start trading now.

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The Bank of Japan’s Tamura believes that raising interest rates soon isn’t necessary. He mentioned that rates could go up if risks increase, but this would only be needed if price risks grow enough to put the BOJ behind. Tamura said there’s no set date for the next rate hike, as it will depend on how tariffs impact the economy. He has softened his previous cautious approach, ensuring he aligns with the overall BOJ stance. His recent comments clearly show that the Bank of Japan is not in a hurry to tighten policies. While he recognizes that rising prices—especially those influenced by tariffs—might eventually need a response, he stressed that any decision would rely on data. This reflects a balance between caution and readiness, indicating the bank would act on inflation risks if they increase, but not before. The key takeaway is Tamura has toned down his earlier views. Instead of pushing ahead of the group, he now shares the broader sentiments of the BOJ, promoting a consistent message. This shift shows a desire to keep policy aligned within the board, especially given growing uncertainties abroad and the fragile state of Japan’s recovery. The bank wants to avoid any messages that might confuse the markets or hint at an early policy change. Given these developments, options traders might want to rethink any short-term bets on swift policy changes. With no clear timeline and a preference for reacting, the chances of sudden rate changes in the coming weeks seem low. Instead of anticipating volatility from central bank actions, focus should turn to incoming economic data, particularly inflation rates, wage trends, and consumer feelings. We’ve noticed that expectations for more frequent rate changes often rise quickly in derivative pricing—sometimes too quickly compared to actual policy. Tamura’s comments remind us that the BOJ still favors patience. This doesn’t mean no changes will happen, but it does caution against acting prematurely without solid data. Therefore, it might be wise to look at volatility surfaces, especially in JPY-linked instruments, for any mispricing that suggests a quick shift is likely. Also, monitoring skew across short-term expirations can provide insight into how others interpret this communication. Furthermore, while economic risks from protective tariffs are highlighted as reasons for future action, the uncertainty of these measures makes them difficult to predict. Pricing them accurately now is quite speculative. This means we are not only watching for big economic surprises, but also for any tone changes from board members who might have previously favored a more aggressive stance. Tamura’s shift may not mean a permanent consensus, but it does steer market expectations toward a more cautious approach. In the short term, strategies assuming increased volatility from the BOJ may not be the best choice. Patience might yield better results than betting on significant policy changes. If price risks do rise, the BOJ might act—but only if necessary, and not by a pre-set plan.

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**EUR/USD Psychological Barrier** The euro-dollar pair has moved higher, closing just above 1.1600. While this may not seem like a big deal, there’s more at play. The option set to expire at 1.1650 is significant. This price level is more than just a number—it’s a psychological barrier that traders are closely monitoring. It may resist any further upward movement, especially if volatility remains low. If this happens, 1.1650 could act as a short-term ceiling. In this context, the stability of the dollar plays a key role, potentially limiting euro gains. For dollar-yen, the situation is more complex. After the pair was rejected by the 100-day moving average, it is now hovering near the 200-hour moving average at 145.10. This isn’t just a statistic; it’s a test of the pair’s short-term strength. Recent dollar weakness has added tension, and while the expiries at 144.50 and 145.00 aren’t huge in volume, they are significant because they align with these technical levels. With these barriers set, price movements are currently restricted as we approach the next trading period in Europe. **Trading Activity Within Range** Considering these elements—option expiry points, technical tests, and moderate momentum—trading is likely to continue within a narrow range until one of these levels is convincingly broken. We’ve noticed that when technical and option-related barriers combine, prices often move sideways, adjusting to position flows until a decisive action is taken. For now, small trades near these known boundaries are clearer than trying to force a breakout that doesn’t happen. As expiry times approach, the urge to anticipate moves before levels are broken can lead to frustrating swings. We’ve seen this pattern too often. It’s more effective to react than to predict, especially when directional flows are driven by time-sensitive factors instead of headlines or broader economic indicators. The best strategy is to stay tactical. Monitor traded volumes closely as expiry approaches. When levels align with periods of price hesitation, they tend to hold their ground. From a risk perspective, it’s also crucial that there are no conflicting patterns suggesting sudden shifts. This means that any retreat from key points—like 1.1650 for euro-dollar or just above 145 for dollar-yen—should be respected unless there is clear volume and follow-through that breaks this expectation. Create your live VT Markets account and start trading now.

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BOJ policymaker Naoki Tamura has observed that inflation is rising faster than he expected since May. While there is some clarity on US tariffs, predicting the economic outlook remains difficult. Tamura suggests that the Bank of Japan might need to act decisively if price risks continue to grow. The BOJ has been somewhat passive during the US tariffs dispute, but some central bank members seem eager to start discussions again. Tamura’s comments indicate a change at the Bank of Japan. Instead of caution, there is now a hint that they may act more quickly. The way inflation is talked about has shifted—it’s no longer seen as a distant issue, but as something urgent, happening faster than expected. This shift signals a need for preparation. This change implies that upward pressure on consumer prices is seen less as temporary. It suggests that tightening monetary policy could be on the table. Tamura’s remarks hint at an ongoing internal discussion that is heating up but not completely settled. Even with some uncertainty lifted regarding American tariffs, domestic pricing pressures are likely to take center stage. For us, this positioning is crucial when assessing interest rate risks. If certain policymakers are ready to adjust policy, especially if inflation rises again even slightly, fixed income instruments could face challenges. Any changes would need to be carefully measured and responses prompt. Expectations should also adjust regarding the risk-reward ratio in yen-related carry trades. A decisive move from the BOJ—whether verbal or otherwise—could trigger currency shifts that unwind long-held positions. Therefore, we must monitor leverage more closely. Current exposure may be manageable, but that could change if the central bank stops being passive. In this situation, upcoming data releases like the next CPI print or consumer confidence readings are not just predictions but important signals. A faster-than-expected CPI could ignite significant changes. For those trading related futures or options, it’s important to pay close attention to forward rate agreements. Now, it’s more about timing than direction. Pricing risk emphasizes the order of events over the next quarter. As the gap between the BOJ’s decisions and market expectations narrows, we can expect rising volatility. Although bond volatility indexes are currently low, they have shifted in the past during quiet weeks. Keep an eye on updates related to balance sheet discussions in the board minutes. Signs of asset trimming alongside talks of rate changes would mean reassessing liquidity assumptions. Consequently, risk premiums tied to Japanese government bonds could undergo re-pricing that spreads outward. Additionally, take note of what hasn’t been said in the past month. Fewer communications often signal an upcoming need for clarity, whether in action or stance. It’s prudent to prepare for both possibilities. Initially, keep spreads tight. Be cautious with cross-border positioning—the situation may be changing.

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