GLOBAL FX STRATEGY

DAILY FX UPDATE
Friday, June 5, 2015

Eric Theoret, CFA, CMT

Currency Strategist
(416) 863-7030
Eric.Theoret@scotiabank.com

FX RISK HIGH ON NONFARM, OPEC, DUDLEY

USD strengthening into NA open; payroll consensus is 225K.

CAD is flat, vulnerable heading into dual employment and OPEC.
USDCAD technicalsbullish with risk of fresh highs for June.
EUR is soft, fading prior data-driven gains; focus turns to U.S. payrolls.
GBP is weak, vulnerable ahead of U.S. employment.
NOK underperform, down over 1.5% as weak industrial production
weighs ahead of June 18 Norges Bank meeting.
USDJPY rises, testing resistance above 124.80. Risk of fresh highs.
AUD consolidates, signals weak following bearish evening star candles.
USDCNY is flat; weekend risk lies in trade data.

FX Market Update - The USD is strong, its gains accelerating into the NA
open with a focus on the 8:30am EST payrolls release (discussed below),
the 10:00am EST OPEC press conference, as well as NY Fed President
Dudleys speech. OPEC is widely expected to maintain its 30MM bpd
production target (headline rumors are confirming a hold). Greece risk
has passed for now, with the bundling of IMF obligations shifting the
focus to the month-end payment datecoinciding with the current programmes end. The broader market tone highlights concerns over the
Fed outlook and the looming normalization as we note broad pressure
across global bond and equity markets, with gold also showing signs of
weakness. Oil prices are showing tentative signs of a recovery in response to the OPEC rumors (middle chart). E.T.
NONFARM The Fed is looking to normalize policy on the back of continued labor market gains and increasing confidence in its ability to
reach the 2% inflation target. Consensus is looking to a 225K nonfarm
print (top chart), and the distribution of expectations is fairly wide, ranging from 140K to 205K. The USD impact is likely to be fairly limited between 200K and 250K, however a number outside this range would be
expected to generate a material USD reaction. The unemployment rate
is expected to remain flat at 5.4% with a secondary focus on average
hourly earnings (exp. flat 2.2% y/y), hours (exp. flat 34.5), as well as underemployment (10.8%) and the participation rate (62.8%). E.T.

NONFARM225K EXPECTED, BELOW 6&12M MA

Source: Bloomberg & Scotiabank FX Strategy

OIL (WTI) APPEARS VULNERABLE ON OPEC DECIS.

Source: Bloomberg & Scotiabank FX Strategy

USDCAD TIE TO OIL PRICES (WTI) CONTINUES

USDCAD (1.2495) CAD is flat, fading its decline on rumors of an OPEC

hold with broader risk centered on the dual employment release. Falling
oil prices have weighed on CAD over the past three sessions (bottom
chart), and vulnerability is high ahead of the official 10:00am EST OPEC
press conference. We see added downside risk for CAD in the employment releases, given their implications for relative policy expectations
and the 2Y U.S.-Canada yield spread. Domestic employment is expected
to rise 10K. E.T.
USDCAD short-term technicals: bullishsignals are in broad agreement, as we note a renewed upswing off support at the 100 day MA
1.2411. USDCAD has broken Tuesdays open 1.2522, shifting the focus to
the June 1 high at 1.2563. E.T.

Source: Bloomberg & Scotiabank FX Strategy

GLOBAL FX STRATEGY

Friday, June 05, 2015

EURUSD (1.1236) EUR is flat, its prior data-driven gains softening as we approach the NA open and the U.S. employment data. Releases have
been supportive, with upside surprises to German factor orders and Spains industrial output providing for modest support to EUR. Greek risk
has been deferred with the bundling of IMF payments into month end, coinciding with the end of the current programme. Greece appears to
be no closer to an agreement with its creditors, with near-term headline risk centered on PM Tsipras parliamentary address at 11:00am EST.
We maintain a bearish, medium-term view on EUR and look to downside into year end with a target of 1.0500. E.T.
EURUSD short-term technicals: mixedEURs three-session rally ended on Thursday with the formation of a bearish shooting star doji. EUR
appears unable to break above Thursdays open at 1.1275. Signals are conflicted, and we look to renewed downside on a break of the 21 day
MA at 1.1142. E.T.
GBPUSD (1.5321) GBP is down 0.3%, having weakened steadily through the European session with market participants looking to the U.S.
employment release. GBP appears vulnerable to near term downside as we consider the ongoing erosion in support from relative policy with
the 2Y U.S.-U.K. yield spread widening back toward Mondays low. E.T.
GBPUSD short-term technicals: bearishrenewed decline following three session rally that ended with a bearish shooting star doji candle.
Focus is on Tuesdays low around 1.5300 with risk of a test to 1.5250 and 1.5200 as we see considerable vulnerability on a break below 1.5180.
E.T.
USDJPY (124.72) JPY is soft, down 0.3% ahead of the NA session and softening in response to broad USD strength. Risk lies with the U.S. employment data and market sentiment, as JPY falls back toward the lower end of its one-week range. Fundamentals hint to further upside in
USDJPY, however we see the potential for risk in the event of a material deterioration in the broader market tone. E.T.
USDJPY short-term technicals: bullishsignals biased to further gains with candles hinting to upside risk following two sessions of consolidation. Gains above 124.80 have been limited, and we look to a potential break of the recent multi-year high around 125.00. E.T.

Jun 05, 2015

TECHNICALS: BUY/SELL SIGNALS AND PIVOT LEVELS

30 Day
Hist Vol
USDCAD
8.3
EURUSD
13.7
GBPUSD
10.2
USDCHF
12.1
USDJPY
6.3
AUDUSD
15.3
USDMXN
10.4
DXY (USD index) 11.2
EURCAD
10.8
GBPCAD
7.2
AUDCAD
10.6
CADMXN
9.1
BoC Noon Rate

Spot

MACD

1.2520
1.1225
1.5310
0.9331
124.79
0.7702
15.58
95.71
1.4054
1.9168
0.9643
12.44
1.2477

buy
buy
sell
buy
buy
sell
buy
buy
buy
buy
buy
sell

9 & 21day MA
buy
sell
sell
buy
buy
sell
buy
na
buy
buy
sell
sell

DMI
buy
buy
buy
sell
buy
sell
buy
sell
buy
buy
buy
buy

RSI
64
58
48
45
75
43
64
46
74
66
53
50

Pivot 1st
Support
1.2461
1.1143
1.5260
0.9282
124.11
0.7648
15.52
94.98
1.3970
1.9089
0.9573
12.39

Pivot 1st
Resist.
1.2554
1.1343
1.5400
0.9376
125.14
0.7771
15.61
96.10
1.4151
1.9234
0.9705
12.51

Source: Scotiabank & Bloomberg

GLOBAL FX STRATEGY
TODAY'S CALENDAR
Time
Country Type
(EST)
08:30
US
EMPL.
08:30
US
EMPL.
08:30
US
EMPL.
08:30
US
EMPL.
08:30
US
EMPL.
08:30
US
EMPL.
08:30
CA
EMPL.
08:30
CA
EMPL.
08:30
CA
EMPL.
10:00
US
OIL
12:40
US
FED
15:00
US
DATA

Release

Friday, June 05, 2015

Period Consensus

Change in Nonfarm Payrolls

May
Unemployment Rate
May
Average Hourly Earnings MoM
May
Average Weekly Hours All Employees
May
Underemployment Rate
May
Labor Force Participation Rate
May
Net Change in Employment
May
Unemployment Rate
May
Labor Productivity QoQ
1Q
OPEC press conference
Fed's Dudley (voting dove) speaks on economy and policy; Q&A
Consumer Credit
Apr

Last

Significance

225K
5.4%
0.2%
34.5
--10.0K
6.8%
-0.2%

223K
5.4%
0.1%
34.5
10.8%
62.8%
-19.7K
6.8%
-0.1%

$16.000B

$20.523B

HIGH
HIGH
med-high
med-high
med-high
med-high
HIGH
HIGH
low
HIGH
HIGH
low

CONFERENCE CALLFX OUTLOOK

Please join us for our FX outlook, presented by Camilla Sutton, Chief FX Strategist on April 2nd.
This presentation is now available at your convenience.
The pre-recorded webcast is available at: https://sbonlinemeetings.webex.com/sbonlinemeetings/lsr.php?
RCID=2df4190477fe46b1968106180010a48c
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
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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