GLOBAL FX STRATEGY | DAILY FX UPDATE

Thursday, November 14, 2019

FOLLOW US ON TWITTER @SCOTIABANKFX

JPY, CHF Firm on Weak Risk Appetite, AUD Lower on Jobs
Shaun Osborne
 USD narrowly mixed versus G-10 as trade doubts re-emerge.
Chief FX Strategist
 CAD soft near yesterday’s low despite crude, spreads; Poloz comments tonight. 416.945.4538
shaun.osborne@scotiabank.com
 EUR struggles to hold gains on better German GDP data.
Juan Manuel Herrera
 GBP choppy in range; soft retail sales data weigh. FX Strategist
416.866.6781
 JPY gains on safety bid as investors eye China trade comments, HK disturbances. juanmanuel.herrera@scotiabank.com
 AUD slides on surprise employment data miss, AUDNZD cross crumbles.
 MXN slightly softer on global stocks; Banxico expected to cut 25bps today.

FX Market Update - Fed Chairman Powell returns to the Hill for his second round of
testimony (House Budget committee) today at 10ET; prepared remarks are the same
as yesterday’s. Mr. Powell acknowledged risks around the outlook but comments—
largely a repetition of those made after the late Oct policy meeting—strongly suggest
that current policy settings would be “appropriate” as long as the economy’s progress
unfolds along the lines the FOMC expected. Meanwhile, US fiscal policy continues to
weaken; the monthly budget statement revealed a slightly wider than expected deficit
in Oct (USD134.5bn, nudging the deficit out to 4.7%/GDP). President Trump
commented that trade talks were progressing rapidly but that followed news of China
refusing to commit to specific farm purchases, suggesting that talks may not be
moving that smoothly and indeed, it seems it is these concerns that are shaping
trading so far today. A mild, risk averse undertone is evident in markets, with
European stocks narrowly mixed to softer and US futures in the red. The G-10 FX
space sees the CHF and JPY out-performing while the NZD and (especially) the
AUD are under-achieving on the session, leaving the USD firm, but little changed
overall. AUD losses of around 0.8% on the day currently were shaped more by
disappointing employment data: jobs fell by -19k versus +15k expected and the
unemployment rate ticked up to 5.3% versus 5.2% expected. The contrast between
the on-hold messaging from the RBNZ this week and signs of labour market slack
which puts the RBA outlook under scrutiny suggests the AUDNZD cross has further
room to fall in the coming weeks, regardless of the sharp fall seen in the past two
sessions. The CNH is steady on the day, despite broader trade concerns (and local
data reflecting the weakest fixed asset investment growth on record) while the HKD
is flat on reports suggesting that a weekend curfew might be imposed amid ongoing
disturbances. The MXN is modestly weaker, reflecting the market’s risk off mood;
the market consensus expects Banxico to cut the Overnight rate 25bps to 7.50% at
14.00ET (though some are predicting a 50bps cut).

USDCAD (1.3266) • The CAD is little changed from last night’s close though crude
oil prices remain buoyant, in the context of recent ranges, while US/Canada spreads
narrowed a little yesterday, suggesting that the CAD should perhaps continue to find
support in the upper 1.32s, even if scope for gains appears limited amid ongoing
trade concerns. BoC Governor Poloz is speaking on the “fourth industrial revolution”
at a SF Fed event this evening (comments are released on the BoC web site at
21.45ET). This is a topic that Gov. Poloz has addressed previously (at Jackson Hole
in 2018, with specific regard to how digital technologies would impact central
banking). There is an audience Q&A but there is not press conference. Scope for
any reference to the near-term policy outlook may be limited, in other words.

USDCAD short-term technicals: Neutral/bullish—USDCAD retains a firm

undertone but the short-term charts are showing signs that USD gains through the
overnight session are stalling, close to where the USD peaked yesterday. Recall
that trend and retracement resistance coalesce around the 1.3275 zone on the

1
 GLOBAL FX STRATEGY | DAILY FX UPDATE
Thursday, November 14, 2019

longer run charts. The broader USD undertone remains firm, however, so upside risks (towards 1.3345/85) are not to be fully ignored
at this point and scope for losses near-term are likely limited to the low 1.32s. Key support is 1.3235. The USD risks slipping a little
more obviously below here.

EURUSD (1.0992) • Germany avoided a technical recession in the third quarter as GDP data released overnight showed that the
German economy expanded by 0.1% against a median consensus call for a 0.1% q/q contraction although following a Q2 0.1% dip
which has revised lower to 0.2%q/q. Going forward, German real GDP is expected to post another mild acceleration in the fourth
quarter as factory orders and survey data point to improving economic conditions. The euro caught a solid increase in reaction to the
data but is back to a slight 0.1% decline against the dollar as markets again turn their attention to the greenback’s strength amid US-
China risks and comments by the ECB’s Guindos who pointed out that the ECB hasn’t exhausted its options and may do provide more
stimulus if necessary.

EURUSD short-term technicals: Bearish—Euro has firmly broken through second support at 1.1005 (from the late-Jun peak)
following last week’s double-top reversal with the charts pointing to a continued bearish outlook for the EUR (towards 1.0975 at least).
Support below here sits at 1.0879.

GBPUSD (1.2840) • Some cracks may have begun to appear in the UK household sector as continuing, though easing, Brexit and
election uncertainty reins in spending at the shops by Britons with a 0.3% m/m decrease in retail sales ex automotive fuel in October,
far from the median forecast of an 0.2% m/m rise matching Sep’s pace. The data release did not lead to a material shift in Cable with
the currency relatively unchanged against yesterday’s close. GBPUSD remains fairly stable around the 1.285 mark with four weeks to
go until the Dec 12 election.

GBPUSD short-term technicals: Neutral—Sterling remains relatively stable around 1.2850 (last week’s low and the late-Oct peak).
We see some firm resistance at the 1.2900 mark. Similarly, a move below the 1.2800 could see Cable retest its 1.2769 support.

USDJPY (108.62) • The yen is outperforming the rest of the G-10 currencies since last night’s NA close following a statement from the
Chinese Ministry of Commerce maintaining that the removal of tariffs is an essential condition for reaching a deal with the US in a so-
called phase one deal. JPY, which is also better bid as unrest in Hong Kong continues, seems to be taking a clearer bullish turn as
markets rein back their risk-on bets after the yen traded around the 109.50 mark per USD late last week. While USDJPY is currently
trading at a one-week low, we think it’s unlikely that the latest news on the trade front are sufficient to push it below the 108 mark which
it briefly reached earlier this month.

TECHNICALS: BUY/SELL SIGNALS AND PIVOT LEVELS Nov 14, 2019

30 Day 9 & 21- Pivot 1st Pivot 1st
Spot MACD DMI RSI
Hist Vol day MA Support Resist.
USDCAD 4.0 1.3252 buy buy buy 62 1.3224 1.3269
EURUSD 3.9 1.1015 sell sell sell 41 1.1004 1.1034
GBPUSD 10.5 1.2834 sell sell buy 56 1.2775 1.2895
USDCHF 4.6 0.9960 buy buy buy 56 0.9934 0.9982
USDJPY 4.4 109.22 buy buy buy 60 108.98 109.37
AUDUSD 6.0 0.6842 sell buy buy 50 0.6826 0.6864
USDMXN 5.7 19.1313 buy buy sell 42 19.09 19.17
DXY (USD index) 3.7 98.36 buy na buy 57 98.19 98.46
EURCAD 4.6 1.4597 buy sell buy 51 1.4566 1.4626
GBPCAD 8.7 1.7008 sell buy buy 62 1.6920 1.7077
AUDCAD 6.0 0.9067 buy buy buy 58 0.9052 0.9080
CADMXN 6.3 14.44 sell sell sell 37 14.41 14.48
BoC Noon Rate #NAME? Source: Scotiabank & Bloomberg
2
 GLOBAL FX STRATEGY | DAILY FX UPDATE
Thursday, November 14, 2019

TODAY'S CALENDAR
Time (ET) Country Release Period Consensus Last
08:30 US PPI Final Demand MoM Oct 0.3% -0.3%
08:30 US PPI Ex Food and Energy MoM Oct 0.2% -0.3%
08:30 US PPI Final Demand YoY Oct 0.9% 1.4%
08:30 CA New Housing Price Index MoM Sep 0.1% 0.1%
08:30 US Initial Jobless Claims 9-Nov 215k 211k
09:00 US Clarida Speaks at Cato Institute in Washington
09:00 EC ECB's Knot Speaks in Frankfurt
09:10 US Fed's Evans Speaks at Fintech Event in Philadelphia
10:00 US Powell Appears Before House Budget Committee
10:15 EC BdF Governor Villeroy Speaks in Frankfurt
11:45 US Fed's Daly Makes Opening Remarks at Economic
12:00 US Fed's Williams Speaks at Economic Policy Conference
12:20 US Fed's Bullard Speaks in Louisville
13:00 US Fed's Kaplan Speaks at Community Forum in Texas
14:00 MX Overnight Rate 14-Nov 7.50% 7.75%
16:30 NZ BusinessNZ Manufacturing PMI Oct -- 48.4
21:15 AU RBA's Debelle Gives Remarks in Sydney
21:45 CA Bank of Canada's Poloz Gives Speech in San
23:30 JN Industrial Production MoM Sep F -- 1.4%
23:30 JN Capacity Utilization MoM Sep -- -2.9%

IMPORTANT NOTICE and DISCLAIMER:

This report is prepared by Scotiabank as a resource for clients of Scotiabank for information and discussion purposes only. This report should be considered a marketing
communication and has not been prepared by a member of the research department of Scotiabank, it is solely for the use of sophisticated institutional investors, and this
report does not constitute investment advice or any personal recommendation to invest in a financial instrument or “investment research” as defined by the UK Prudential
Regulation Authority or UK Financial Conduct Authority. This document has not been prepared in accordance with EU legal requirements designed to promote the independ-
ence of investment research and the information contained in this publication is not subject to any prohibition in the EU on dealing ahead of the dissemination of investment
research. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions
contained herein have been compiled or arrived at from publically available sources believed reliable but no representation or warranty, express or implied, is made as to
their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Scotiabank or any of its employees incur any re-
sponsibility. Neither Scotiabank nor its representatives accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not, and is
not constructed as, an offer to sell or solicitation of any offer to buy any financial instruments and has no regard to the specific investment objectives, financial situation or
particular needs of any recipient. It is not intended to provide legal, tax, accounting or other advice. Scotiabank and/or its respective officers, directors or employees may
from time to time take positions in the products mentioned herein as principal or agent. Directors, officers or employees of Scotiabank may serve as directors of corporations
referred to herein. Scotiabank may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may
receive remuneration for same. This report may include forward-looking statements about the objectives and strategies of Scotiabank. Such forward-looking statements are
inherently subject to uncertainties beyond the control of Scotiabank including but not limited to economic and financial conditions globally, regulatory development in Canada
and elsewhere, technological developments and competition. The reader is cautioned that the member's actual performance could differ materially from such forward-
looking statements. Past performance or simulated past performance is not a reliable indicator of future results. Forecasts are not a reliable indicator of future performance.
You should note that the manner in which you implement any of strategies set out in this report may expose you to significant risk and you should carefully consider your
ability to bear such risks through consultation with your legal, accounting and other advisors. Information in this report regarding services and products of Scotiabank is
applicable only in jurisdictions where such services and products may lawfully be offered for sale and is void where prohibited by law. If you access this report from outside
of Canada, you are responsible for compliance with local, national and international laws. Not all products and services are available across Canada or in all countries. All
Scotiabank products and services are subject to the terms of applicable agreements. This report and all information, opinions and conclusions contained in it are protected
by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in
it be referred to without in each case the prior express consent of Scotiabank. Scotiabank is a Canadian chartered bank.

If you are affected by MIFID II, you must advise us in writing at trade.supervision@scotiabank.com.

™Trademark of The Bank of Nova Scotia. Used under license, where applicable. Scotiabank, together with “Global Banking and Markets”, is a marketing name for the glob-
al corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including,
Scotia Capital Inc. and Scotia Capital (USA) Inc., Scotiabank Europe plc, Scotiabank (Ireland) Limited - all members of the Scotia-bank Group and authorized users of the
mark. The Bank of Nova Scotia is incorporated in Canada with limited liability. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund. Scotia Capital
(USA) Inc. is a broker-dealer registered with the SEC and is a member of FINRA, NYSE, NFA and SIPC. The Bank of Nova Scotia is authorized and regulated by the Office
of the Superintendent of Financial Institutions in Canada. The Bank of Nova Scotia is authorized by the Prudential Regulation Authority and subject to regulation by the
Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the Prudential
Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority.

To unsubscribe from receiving further Commercial Electronic Messages click this link: www.unsubscribe.gbm.scotiabank.com.