GLOBALFXSTRATEGY

DAILYFXUPDATE
Tuesday,July8,2014
CAMILLASUTTON,CFA,CMT
ChiefFXStrategist,ManagingDirector
T.416.866.5470
camilla.suon@scoabank.com

EURLIMITEDBYFIBOLEVELS
USD is mixed with a familiar paern of weak Europeans and strong
growthcurrencies.Limiteddatatodaybutahawk&adovespeak.
CAD is at but yesterdays weakness warns that market is growing
nervous;fundamentalsdontsupportfurthersustainedstrength.
EURisso;butimmateriallysoaersoGermantradedata.
EUR nearterm range trade between 1.35 1.37; medterm techni
calsturnbearishwithbreakoftrend&50daycrossingbelow200day.
CHFissoinaonfallsbackintodeaontyinghandsofSNB.
GBPissoaerdisappoinngindustrial&manuproducon.
JPYisrangeboundtradedecitnarrowsbutexportssllaconcern.
AUD is up, having now retraced half of Gov Stevens induced weak
ness;signalsarebearishunlessAUDmanagestocloseabove0.9443.
CNYisatleadingintotheCPIrelease,9:30pmEST&cons:2.4%y/y.

FX Market Update MarketsarequietleadingintotheNAsessionthat

will kick o earnings season with the release of Alcoas earnings. The
majors are relavely quiet with some weakness from GBP and EUR on
so data and strong growth currencies leading into Chinas CPI report
latertoday(9:30pmEST).Thehighlighttodayislikelytocomefromthe
twoFedspeakerswithLacker(nonvonghawk)at1pmESTwhointhe
spring saw the rst rate hike in early 2015; and Kocherlakota (vong
dove) who could update his April comments that the Fed was under
shoongonbothmandates.Accordinglythetwospeakerscouldbalance
eachother.C.S.

USDCAD (1.0685) CADisattoyesterdayscloseaerrelavelyquiet

Asian and European sessions. Yesterdays weakness was driven by a
concerning Ivey PMI, which came in well under expectaons at 46.9;
however this is a volale series and markets dont tend to react as
strongly to it; suggesng that traders are nervous with USDCADs cur
rentlevels.TheBoCOutlookSurveyhadfewmaterialchangessincethe
spring; with respondents nong only a modest improvement in past
sales but posive expectaons for future sales and a gradual rming in
exports.Intermsofinaon,therewasessenallynochange;withover
90% expecng inaon with the BoC control band (1 to 3%) over the
nexttwoyears.ThereisnoCanadiandata.C.S.

USDCAD shortterm technicals: bearishhowever are irng with a

bullishturnastheMACD irtswithabreakandspothintsataboom
ing formaon. The market is nervous. We favour playing USDCAD from
the long side. Support lies at the recent low of 1.0621 while resistance
liesat1.0720.C.S.

EURUSD (1.3595) EURissobutslltradingwithinyesterdaysrange.

Aerasoindustrialproduconprintyesterday;todaysGermantrade
surplus was wider than expected at 17.8bn, but both exports and im
portsdisappointed,falling1.1%m/mand3.4%m/m,respecvely.ECB
memberLindesuggestedthatCPIisexpectedtoremainfarfromthe2%
targetbutthatSpanishindicatorssuggestaposivetrend.C.S.

BOCSURVEYSUGGESTCONTAINEDINFLATION
UKINDUSTRIALANDMANUPRODUCTION
EURTRADINGINFIBORANGE1.3520TO1.3701
Source:TheBankofCanada
Source:Bloomberg&ScoabankFXStrategy
Source:Bloomberg&ScoabankFXStrategy
Industrialproducony/y
Manufacturingproducony/y
%
Overthenext2yrsexpectaononannualCPI

Tuesday,July08,2014
2
GLOBALFXSTRATEGY
SuggestedReading
Welcometoeverythingboom,ormaybetheeverythingbubble,N.Irwin,NYT(July8,2014)Aroundtheworld,nearlyeveryassetclassis
expensivebyhistoricalstandards.Thephenomenonisrootedintwointerrelatedforces:savingsandcentralbankpolicy.
EurosreserveappealfadesasECBpromptsdecline,C.Zachariahs,Bloomberg(July8,2014)TheECBsunprecedentedsmulusmeasures
arestarngtodimtheeurosallureamongthekeepersofforeignexchangereserves.
ECBunderpressuretotacklecrazyeuro,M.Stothard,FT(July8,2014)PressureismounngontheECBtotakeaconagainstapersistently
strongeurowithaleadingindustrialistcallingonFrankfurttotacklethecrazystrengthofthecurrency.
FearsgrowoverlongtermhittoIraqoiloutput,A.Raval,FT(July8,2014)ConcernsoverIraqsabilitytosupplyoilincludeweakinfrastruc
ture,waterissues&labourshortages.Recentviolencecompoundstheseproblemsdrivingquesonsovertheworlds2ndbiggestproducer.
Yellendidntruleoutmonetarypolicytocombatbubbles,J.Yellen,WSJ(July8,2014)ChairYellencausedasrwhensheappearedtorule
outraisinginterestratestotamenancialbubbles.Butaclosereadingsuggestsshewenttogreatlengthstoleaveheroponsopen.
eral Reserve Bank of NY (in yesterdays
morning document and link here) high
lighted the disappoinng performance
of trade, given the expected export
benets of a weak yen are being oset
by the cost of imporng fuel. USDJPY
connues to trade within a narrow
range, showing remarkable stability
with the 50, 100 and 200day moving
averages all within 50 points of one
another. The catalyst for a break in the
rangeislikelytocomefromfundamen
tal data that would change the risk of
Japanesemonetarypolicy.C.S.

USDJPY shortterm technicals: mixed

with all studies suggesng that USDJPY
istradingwithinarelavelysmallmedi
umterm range. In this environment,
technicals are providing few clues for
nearterm direcon. Support lies at the
recent low of 101.24 while resistance
liesat100dayMAat102.18.C.S.

EURUSD shortterm technicals: bullish but studies are fading and momentum has evaporated.
EURislikelytotradewithinarange1.3500to1.3700unlthereisastrongercatalyst.Theseare
alsoclosetoitsFibolevelsfromtheJuly2013toMay2014rallywiththe23.6%retracementat
1.3701andthe38.2%at1.3520seechart.ThenegavepressmenonsofEURappearstohave
increased, pung addional pressure on EUR. While longerterm technicals have shied to an
increasingly bearish stance, with the breaking of the upward trend and the 50day MA crossing
below the 200day MAsee chart. The above menoned Fibo levels can be used as support/
resistance.C.S.

GBPUSD (1.7115) GBP is weak, down 0.1%, having touched a sixsession low. Soer than ex
pectedindustrialandmanufacturingproducon,unexpectedlyfalling0.7%m/mand1.3%m/m
werethemaindriver.Thedeceleraonisaconcern(seechart),howeveritisunlikelytoshithe
BoEpolicystance.Wedonotexpectanychangeatthisweeksmeeng;butdoexpectthatGov
ernor Carney connues to highlight that interest rate hikes are likely to come sooner than the
marketexpectsbutproveslowandgradual.Intheneartermthisshouldconnuetosupportan
elevatedGBP.C.S.

GBPUSD shortterm technicals: bullishhowever momentum is fading and studies are shiing
towards more neutral and even sell signals. Accordingly, the nearterm outlook for GBP is cau
ous;abreakandclosebelowlastTuesdaysopenat1.7106wouldshisignalstowardsamore
bearishoutlook.Supportlies at1.7106,followedby1.7080;resistanceliesattherecenthighof
1.7180.C.S.

USDJPY (101.75) JPY is up 0.1%, during a relavely unevenul Asian and European sessions.
Japanscurrentaccountsurpluswidenedto523bnwhilethetradedecitnarrowedto676bn.
ThepathofexportsremainsanimportantconcernforJPYtraders.YesterdaysarclebytheFed
TECHNICALS:BUY/SELLSIGNALSANDPIVOTLEVELS
30Day
Hi stVol
Spot MACD
9&21
dayMA
DMI RSI
Pi vot1st
Support
Pi vot1st
Resi st.
USDCAD 3.9 1.0683 sel l sel l sel l 37 1.0645 1.0708
EURUSD 3.6 1.3594 buy buy sel l 45 1.3577 1.3611
GBPUSD 3.9 1.7106 buy buy buy 62 1.7071 1.7156
USDCHF 4.4 0.8940 sel l sel l buy 52 0.8927 0.8956
USDJPY 3.8 101.73 buy sel l sel l 47 101.55 102.06
AUDUSD 7.2 0.9392 sel l buy buy 52 0.9354 0.9417
USDMXN 6.2 13.00 sel l sel l buy 52 12.96 13.03
DXY(USDi ndex) 3.1 80.27 sel l na buy 51 80.19 80.36
EURCAD 5.0 1.4523 buy sel l sel l 36 1.4467 1.4564
GBPCAD 4.9 1.8275 buy sel l sel l 47 1.8206 1.8333
AUDCAD 6.6 1.0034 sel l sel l sel l 44 0.9980 1.0066
CADMXN 5.5 12.17 buy buy buy 65 12.15 12.20
BoCNoonRate 1.0662 Source:Scotiabank&Bloomberg
Jul08,2014

Tuesday,July08,2014
GLOBALFXSTRATEGY
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CONTACTSGLOBALFXSTRATEGY
Pleasecontactauthorsdirectlytobeaddedtodistribuonlists
CamillaSuon,CFA,CMT
ChiefFXStrategist,ManagingDirector
T.416.866.5470
camilla.suon@scoabank.com

EricTheoret
FXStrategist(G10),AssociateDirector
T.416.863.7030
eric.theoret@scoabank.com

EduardoSuarez
SeniorFXStrategist(LATAM),Director
T.416.945.4538
eduardo.suarez@scoabank.com

SachaTihanyi
SeniorFXStrategist(ASIAexJapan),Director
T.852.2861.4770
sacha.hanyi@scoabank.com
TODAY'SRELEASES&SPEAKERS
Ti me
(EST)
Country Rel ease Peri od Consensus Last Si gni fi cance
10:00 UK NIESRGDPEsti mate Jun 0.9% med
10:00 US JOLTSJobOpeni ngs May 4350 4455 med
13:00 US Fed'sLacker(nonvoti nghawk)speaksoneconomi coutl ook;Q&A medhi gh
13:45 US Fed'sKocherl akota(voti ngdove)speaksonmonetarypol i cy;Q&A medhi gh
15:00 US ConsumerCredi t May $20.000B $26.847B l ow
15:00 NZ RBNZGov.Wheel erspeakstoapri vateaudi ence l ow
19:01 UK BRCShopPri ceIndexYoY Jun 1.4% med
21:30 CH PPIYoY Jun 1.0% 1.4% HIGH
21:30 CH CPIYoY Jun 2.4% 2.5% HIGH
02:00 SW PESUnempl oymentRate Jun 4.3% 3.9% medhi gh
02:00 JN Machi neTool OrdersYoY JunP 24.1% med
02:10 EC ECB'sCoeureparti ci patesi npanel di scussi ononGreece med
03:00 EC ECB'sPraetspeaksongrowth;Q&Aunknown med