G10 FX Daily Briefing (PDF)

GLOBAL FX STRATEGY
DAILY FX UPDATE
Camilla Sutton, CFA, CMT
Chief Currency Strategist
(416) 866-5470
Eric Theoret, CFA, CMT
Currency Strategist
(416) 863-7030
Friday, February 6, 2015
Camilla.Sutton@scotiabank.com
Eric.Theoret@scotiabank.com
FX QUIET, WAITING FOR PAYROLLS
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USD—flat vs all but EUR & AUD; consensus expecting 230K for NFP.
CAD is unchanged ahead of dual jobs release; 5K gain expected.
EUR weakens in response to industrial data from Spain & Germany.
GBP flat, showing greatest weekly gain since February 2014.
CHF consolidates; SNB reserves at 498bn as of January.
USDJPY quiet, constrained by fundamentals & broader tone.
AUD rallies in response to RBA quarterly Statement report, despite
modest delay to anticipated recovery & growth drivers’ transition.
 CNY strengthens as PBOC fix rises most since November.
FX Market Update - Markets are quiet ahead of payrolls, with most of
the G10 currencies consolidating vs the USD, with the exception of fundamentally-driven weakness in EUR and outperformance in AUD following the release of the RBA’s quarterly Statement on Monetary Policy.
The broader market tone is mixed, with equity futures hinting to modest
gains as gold softens while the U.S. 10Y yield consolidates just above
1.80%. Commodities are divergent, with gains in oil prices offset by an
accelerating decline in copper. Focus through the NA session will center
on the U.S. employment release (discussed below), with voting Fed dove
Lockhart scheduled to speak at 12:45pm EST. E.T.
Nonfarm payrolls and the USD—consensus is calling for job gains of
230k, just below the six month moving average of 264k, with estimates
ranging from 180k to 286k. Recent U.S. economic data has been uneven,
helping to push expectations for the first Fed interest rate increase out
to the October 28th meeting. The USD and interest rate expectations
are always sensitive to the nonfarm payrolls print, which will hold again
today, particularly because of recent market volatility combined with
building anxiety over the strength of the U.S. recovery. Our summary of
the USD reaction is below:
 An above expected print (+250k): is likely to see the USD rally between 50 and 100 points against most currencies;
 A slight miss (210 to 230k): is likely to drive a slight USD drop—30
points;
 A significant miss (below 200k): could see further USD long covering
and drive a more material downside drop.
Developments on the wage front will also prove important, with a increase in wages supporting the current Fed stance. C.S.
USDCAD (1.2444) • CAD is unchanged ahead of the employment release
(discussed below), consolidating vs the USD at the upper end of its one
week range. CAD remains highly sensitive to movement in oil prices (see
top chart), with the latter now directly influencing the outlook for BoC
policy as we note an elevated CAD correlation to the 2Y U.S.-Canada
yield spread (0.90 on a 30 day, rolling basis). The 2Y spread has continued to widen this week, driven by a divergence in the tone of recent
data (GDP, PMI’s) and thus intensifying the focus on the dual employment release at 8:30am EST (see calendar on p3). E.T.
USDCAD REMAINS HIGHLY SENSITIVE TO OIL
Source: Bloomberg & Scotiabank FX Strategy
U.S. PAYROLLS SEEN RISING 230K; 6MO. MA AT 264
Source: Bloomberg & Scotiabank FX Strategy
OIL (WTI) CONSOLIDATING ABOVE 21 DAY MA
50 day MA
21 day MA
Source: Bloomberg & Scotiabank FX Strategy
GLOBAL FX STRATEGY
Friday, February 06, 2015
Canadian employment are expected to show a net gain of 5k jobs in January; however during 2014 the average miss on consensus estimate
was 27k. Accordingly the release has tended to stray materially from consensus estimates. In the current volatile environment, CAD will be
sensitive to both the Canadian and U.S. releases. C.S.
USDCAD short-term technicals: neutral—momentum indicators are conflicted and the ADX highlights a softening in the bullish trend. Recent
congestion has centered around the 21 day MA (1.2526) and we focus on near term support around 1.2350 with resistance expected at 1.2580
and 1.2620. E.T.
EURUSD (1.1455) • EUR is weak, falling ahead of the NA session with a decline that began in response to disappointing German industrial production data and compounded by the subsequent release of Spain’s weak industrial output figures. A special meeting of euro area finance
ministers has been scheduled for Feb 11, ahead of the Feb 12 leaders’ summit, with the focus of discussion expected to center on Greece.
EUR’s sensitivity to headline risk remains elevated, as underscored by the Wednesday’s lifting of the ECB’s collateral waiver. E.T.
EURUSD short-term technicals: neutral—technicals appear to be lacking a clear bias, and we focus on the 21 day MA (1.1494) as a near term
level of resistance. A break of this level would shift the focus to the Jan 22 open at 1.1610. Near term support is expected around 1.1350. E.T.
GBPUSD (1.5325) • GBP is flat, consolidating despite the release of a wider than expected trade deficit. Focus for GBP centers on the outlook
for BoE policy, the next key release being the BoE inflation report scheduled for Feb 12. BoE rate expectations are neutral with a slight hawkish
bias, reflecting the unanimity of the MPC as policymakers attempt to assess the medium-term implications of the recent softening of inflation.
GBP has risen 1.8% this week, registering its greatest gain since February 2014 and steadily retracing its January decline. We focus on potential
resistance around 1.5350 and the 50 day MA (1.5381). E.T.
USDJPY (117.29) • JPY is quiet ahead of the NA session, with movement that continues to be constrained by the offsetting impact of fundamentals and a sensitivity to the broader market tone. Technicals are neutral, a reflection of the tightened range since mid-January. Short term
MA’s appear to be providing resistance, and we focus on the 21 day MA (117.78). E.T.
Feb 06, 2015
TECHNICALS: BUY/SELL SIGNALS AND PIVOT LEVELS
30 Day
Hist Vol
USDCAD
12.6
EURUSD
12.7
GBPUSD
8.7
USDCHF
61.4
USDJPY
10.1
AUDUSD
10.8
USDMXN
12.2
DXY (USD index)
7.7
EURCAD
13.3
GBPCAD
11.8
AUDCAD
11.2
CADMXN
11.2
BoC Noon Rate
Spot
MACD
1.2443
1.1463
1.5331
0.9198
117.25
0.7869
14.73
93.62
1.4263
1.9077
0.9792
11.84
1.2422
sell
buy
buy
buy
sell
sell
sell
sell
buy
buy
sell
buy
9 & 21day MA
buy
sell
buy
sell
sell
sell
buy
na
buy
buy
sell
sell
DMI
buy
sell
buy
sell
sell
sell
buy
buy
buy
buy
buy
sell
RSI
60
43
57
46
45
39
51
57
55
67
52
39
Pivot 1st
Support
1.2362
1.1345
1.5215
0.9156
116.98
0.7777
14.67
93.19
1.4186
1.8986
0.9715
11.79
Pivot 1st
Resist.
1.2555
1.1540
1.5400
0.9277
117.56
0.7919
14.86
94.27
1.4340
1.9158
0.9833
11.90
Source: Scotiabank & Bloomberg
2
GLOBAL FX STRATEGY
Friday, February 06, 2015
TODAY'S RELEASES & SPEAKERS
Time
Country Type Release
(EST)
08:30
US
EMPL. Change in Nonfarm Payrolls
08:30
US
EMPL. Unemployment Rate
08:30
US
EMPL. Underemployment Rate
08:30
US
EMPL. Labor Force Participation Rate
08:30
US
EMPL. Average Hourly Earnings MoM
10:30
US
EMPL. Average Weekly Hours All Employees
08:30
CA
EMPL. Net Change in Employment
08:30
CA
EMPL. Unemployment Rate
08:30
CA
DATA Building Permits MoM
12:45
US
FED Fed's Lockhart (voting dove) speaks on policyl; Q&A
15:00
US
DATA Consumer Credit
Period Consensus
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Dec
Dec
230K
5.6%
-62.7%
0.3%
34.6
5.0K
6.7%
5.0%
Last
Significance
252K
5.6%
11.2%
62.7%
-0.2%
34.6
-4.3K
6.6%
-13.8%
HIGH
HIGH
med
med
HIGH
med
HIGH
HIGH
med
med-high
$15.000B $14.081B
low
CONTACTS - GLOBAL FX STRATEGY
Please contact authors directly to be added to distribution lists
Camilla Sutton, CFA, CMT
Chief FX Strategist, Managing Director
T.416.866.5470
camilla.sutton@scotiabank.com
Eduardo Suarez
Senior FX Strategist (LATAM), Director
T.416.945.4538
eduardo.suarez@scotiabank.com
Eric Theoret, CFA, CMT
FX Strategist (G10), Associate Director
T.416.863.7030
eric.theoret@scotiabank.com
Sacha Tihanyi
Senior FX Strategist (ASIA ex Japan), Director
T. 852.2861.4770
sacha.tihanyi@scotiabank.com
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