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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
Tuesday, March 17, 2015
[email protected]
[email protected]
BOJ ADDS TO BOE CONCERN ON NEAR TERM INFLATION
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USD rises vs GBP while weakening vs EUR as others consolidate.
CAD vulnerable amid steady decline in oil, weighing on BoC outlook.
EUR rises on positioning, upside surprise to euro area core CPI.
GBP weakens, pressured ahead of key domestic risks on Wednesday.
CHF rising in line with EUR; key domestic risk is SNB Thursday.
USDJPY consolidates within narrow range as BoJ highlights CPI risks.
AUD flat as RBA minutes highlight data dependency with dovish bias.
CNY rises; PBoC easing financial conditions.
FX Market Update - A broader tone of risk aversion is weighing on markets as we enter the NA session, with pressure on commodities, U.S.
yields and equity futures. So far this week only EUR, NOK and SEK have
made fresh lows vs the USD, with all of the other G10 currencies consolidating ahead of the Fed. The U.S. 10Y appears set to break its March 12
low at 2.04%, and oil prices have resumed their decline, with WTI breaking below Monday’s fresh multi-year low at $42.85 (top chart). European equity indices are reacting to disappointing ZEW data from Germany,
however the primary focus remains centered on the Fed as policymakers begin their two day meeting. Today’s U.S. releases are limited to
housing starts and building permits. E.T.
Tone shifts among the G4 central banks and implications for the Fed:
The overnight statement from the BoJ saw a shift in tone toward the
outlook for inflation, softening expectations for the near term path in
light of energy prices while reinforcing confidence in policymakers’ ability to achieve their target. The tone was similar to that conveyed in last
week’s comments from BoE Gov. Carney and MPC member Weale, as
both highlighted the impact of global developments on the outlook for
domestic inflation, providing ‘breathing space’ in the path for tightening.
Weakened energy prices, soft global inflation and the added disinflationary pressure of a strong USD — with the DXY up nearly 6% since the Jan
28 FOMC (middle chart) — are all factors that are likely weigh on the
FOMC as they consider the outlook for data-dependent policy normalization. E.T.
USDCAD (1.2786) • USDCAD is quiet, consolidating within a tightened
range in an environment of shifting correlations that continue to highlight a heightened sensitivity to oil prices and the broader USD. Monday’s fresh lows in WTI leave CAD vulnerable, and the renewed decline
in Brent has weighed on expectations for the BoC policy outlook—with
OIS pricing in a 70% chance of a 25bpt cut over the next 12 months.
Tuesday’s NA session may see added risk from domestic manufacturing
sales—expected to weaken 1.2% m/m. E.T.
USDCAD short-term technicals: bullish—momentum indicators hint to
further upside, as the ADX appears set to confirm with a bullish trend.
Inside ranges since Friday highlight uncertainty and consolidation, however the overall bias remains tilted to continued gains. E.T.
WTI MAKES FRESH LOWS AS BRENT SOFTENS
Brent
WTI
Source: Bloomberg & Scotiabank FX Strategy
DXY HAS RALLIED NEARLY 6% SINCE JAN FOMC
Source: Bloomberg & Scotiabank FX Strategy
USDJPY TRADING WITHIN TIGHTENED RANGE
USDJPY
high-low range
& 30 day MA
Source: Bloomberg & Scotiabank FX Strategy
GLOBAL FX STRATEGY
Tuesday, March 17, 2015
EURUSD (1.0612) • EUR is showing modest strength as we enter the NA session, building on Monday’s gains with an ongoing focus on the Fed
as market participants consider the offsetting impact of a soft German ZEW expectations print against the upside surprise in core euro area CPI
(rising to 0.7% y/y). Monday’s release of ECB asset purchase data detailed a 9.75bn total in public sector purchases for the week ended March
13, a figure that was generally in line with public comments from members of the Governing Council. E.T.
EURUSD short-term technicals: bearish to neutral—signals are bearish but momentum indicators are softening. A sustained break above the
March 11 close at 1.0547 has shifted the focus to potential gains, as we look to Friday’s open at 1.0635 followed by the 9 day MA (1.0696). A
failure to close above 1.06355 would be bearish. E.T.
GBPUSD (1.4750) • GBP is weak, pressured by the combination of sentiment and broader concerns centered on the outlook for global inflation. This week’s key risk events for GBP will be released over the next 24 hours as we look to the UK Budget, employment data and BoE
minutes. The minutes will be key in the context of last week’s tone shift in favor of ‘breathing space’ provided by soft inflation. E.T.
GBPUSD short-term technicals: bearish—gains appear challenged above 1.4850 and momentum indicators remain biased to further decline.
E.T.
USDJPY (121.22) • JPY is flat following the BoJ’s policy decision to maintain the pace of QE at 80trn. The statement tone softened the near
term outlook for inflation, and comments from Gov. Kuroda hinted to the risk of a temporary ‘dip’ into deflation. Domestic data have shown
signs of improvement, with both leading and coincident indicators rising—the latter reaching its highest level since March 2014 to fully recover
the consumption tax hike decline. Near term risk centers on trade (7:50pm EST) as well as the broader tone heading into Wednesday’s Fed
events. E.T.
USDJPY short-term technicals: bullish—signals are broadly bullish, however we note the increasingly tightened range in USDJPY (bottom
chart) following the March 12 hammer doji. Support is expected at the 9 day MA (121.12) and we await a break above the March 10 high near
122.00. E.T.
AUDUSD (0.7656) • AUD is up a modest 0.2% as we approach the NA session, having recovered from RBA-driven pressure in response to the
minutes release. The minutes’ dovish tone detailed prior concerns regarding ‘subdued’ labor markets and spare capacity, with limited wage
pressure helping to offset the inflationary impact of a lower exchange rate. The bias remains titled toward further easing, albeit with a reduced
sense of urgency as policymakers seek to assess incoming data. E.T.
AUDUSD short-term technicals: bearish—RSI at 41 leaves ample space for further downside, with broad concurrence among signals hinting to
further decline. Near term gains are likely to be challenged above 0.7720. We await a break below 0.7600. E.T.
Mar 17, 2015
TECHNICALS: BUY/SELL SIGNALS AND PIVOT LEVELS
30 Day
Hist Vol
USDCAD
9.5
EURUSD
12.1
GBPUSD
8.9
USDCHF
9.7
USDJPY
7.5
AUDUSD
9.6
USDMXN
11.1
DXY (USD index)
9.4
EURCAD
8.4
GBPCAD
8.6
AUDCAD
7.1
CADMXN
7.8
BoC Noon Rate
Spot
MACD
1.2787
1.0612
1.4752
1.0024
121.24
0.7653
15.44
99.51
1.3569
1.8863
0.9785
12.07
1.2765
buy
sell
sell
buy
buy
sell
buy
buy
sell
sell
buy
buy
9 & 21day MA
buy
sell
sell
buy
buy
sell
buy
na
sell
sell
sell
buy
DMI
buy
sell
sell
buy
buy
sell
buy
buy
sell
sell
buy
buy
RSI
63
28
31
70
65
41
61
73
32
44
54
51
Pivot 1st
Support
1.2742
1.0507
1.4706
0.9997
121.05
0.7617
15.37
99.12
1.3443
1.8816
0.9742
12.03
Pivot 1st
Resist.
1.2825
1.0669
1.4826
1.0071
121.48
0.7685
15.51
100.10
1.3632
1.8938
0.9818
12.14
Source: Scotiabank & Bloomberg
2
GLOBAL FX STRATEGY
TODAY'S DATA
Time
Country Type Release
(EST)
08:30
CA
DATA Manufacturing Sales MoM
08:30
US
DATA Housing Starts
08:30
US
DATA Building Permits
19:50
JN
DATA Trade Balance
21:30
CH
DATA China February Property Prices
02:00
JN
DATA Machine Tool Orders YoY
05:30
UK
EMPL. Average Weekly Earnings 3M/YoY
05:30
UK
EMPL. ILO Unemployment Rate 3Mths
05:30
UK
EMPL. Employment Change 3M/3M
06:00
EC
DATA Trade Balance NSA
06:00
EC
DATA Construction Output MoM
TODAY'S CENTRAL BANK EVENTS & SPEAKERS
Time
Country Type Release
(EST)
01:00
JN
BOJ Bank of Japan's Monthly Economic Report for March
05:30
UK
BOE Bank of England Minutes
06:00
EC
ECB ECB Pres. Draghi speaks at premises inauguration
Tuesday, March 17, 2015
Period Consensus
Last
Significance
Jan
Feb
Feb
Feb
-1.2%
1040K
1065K
-¥986.6B
1.7%
1065K
1053K
-¥1177.5B
Feb F
Jan
Jan
Jan
Jan
Jan
-2.2%
5.6%
130K
15.0B
--
28.9%
2.1%
5.7%
103K
24.3B
-0.8%
med-high
med
med
med
med-high
med
med-high
med-high
med-high
med
low
Last
Significance
Period Consensus
med
HIGH
low
CONFERENCE CALL—USDCAD OUTLOOK
Please join us for our USDCAD outlook, presented by Camilla Sutton, Chief FX Strategist.
This presentation is now available at your convenience.
The pre-recorded webcast is available at: https://sbonlinemeetings.webex.com/sbonlinemeetings/ldr.php?
RCID=eac6b9c5768df98df6f93ab03f92763f
The presentation is available at: http://www.gfx.gbm.scotiabank.com/Market_Reports/FX_Strategy_Presentation.html
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
[email protected]
Eduardo Suarez
Senior FX Strategist (LATAM), Director
T.416.945.4538
[email protected]
Eric Theoret, CFA, CMT
FX Strategist (G10), Associate Director
T.416.863.7030
[email protected]
Sacha Tihanyi
Senior FX Strategist (ASIA ex Japan), Director
T. 852.2861.4770
[email protected]
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