FOPLADE- Analisis Financiero.

CANADIAN CPI STRONGER THAN EXPECTED, GIVING A LIFT TO CAD

• Canadian CPI increased 0.3%m/m on the headline and 0.1%m/m on core.
• Recent developments (solid economic releases, gold & minutes) good for USD & CAD.
• Blizzards in northeast could play havoc with jobless claims.
• UK fiscal position is weighing on GBP today.
• IMF rattles gold prices as it turns to the open market for remaining gold sale.

FX Market Update

Markets have been quiet since yesterday’s North American close. The USD is mixed,
with JPY, MXN and CAD having gained ground and EUR, AUD, GBP and NOK having
lost; however most asset classes are close to yesterday’s North American closing levels.
• Developments yesterday were generally USD positive as US economic
data was firm, with stronger than expected housing starts and industrial production.
The FOMC minutes provided few new clues as to Fed timing, but highlighted that
there appears to be an increased desire to begin selling some of the assets accumulated
during the financial crisis. In addition, there are clear indications that the discount
rate will soon begin to move higher. Finally, the IMF announced that it has sold
212 tonnes of the 403 tonnes of gold it had announced it would sell in September
and that it will now begin selling the remaining 191 tons on the open market. • Technically,
yesterday’s strong up move in the USD (DXY index) was encouraging, however the
index will need to break above the February 12th high of 80.75 for upward pressure to
be maintained. • Today’s releases include jobless claims for the week ending February
13th (cons. 438k). Blizzards in the US northeast will play havoc with the
result, even if the government makes some manual adjustments. Accordingly it is likely
that the release will quickly be discounted. This issue will also be a factor in the February
non-farm payroll release. The more important factor for employment is that the
trends are in the right direction, with the deterioration appearing to have ended. C.S.
Americas
USDCAD (1.0445) • USDCAD has been pressured lower on the back of stronger than
expected Canadian CPI; however the pair has only moved 25 points from yesterday’s
North American close. Headline CPI increased 0.3%m/m, core increased 0.1%m/m and
on a seasonally adjusted basis CPI increased 0.4%. Should this be the beginning of a
trend it will increase pressure on the Bank of Canada to tighten policy and add a lift to
CAD. • On a year-to-date basis USDCAD has been fairly range bound, trading
within a 556 point range between 1.0225 and 1.0781. Historically, the last
several years have seen much wider than average annual ranges in USDCAD
- see top chart. These large ranges have created opportunities for tactical players but
increased the complexity for hedgers. Even though this year has started with a quiet
rangie feel to it, we would expect that by mid-year USDCAD will have broken
through its current range to the downside (stronger CAD). • Today, international
securities transactions are expected to increase $6.5bn. This would be
the twelfth monthly rise and provide further evidence of the global demand for Canadian
financial assets. Sentiment towards Canadian based assets (financial and commodities)
remains strong and this should help support CAD over the coming quarters. •
Technically, the outlook for USDCAD is increasingly bearish, however with the
ADX at just 17 (the ADX attempts to quantify whether or not an asset is in a trending or
range trading environment, with a reading over 25 generally interpreted to indicate the
presence of a trend), it indicates that USDCAD is still a long way from breaking its
range. We expect USDCAD to favour the lower-end of its range in the nearterm.
Today’s pivots - see table on page 2 - suggest buying pressure at
1.0417 and selling pressure at 1.0504. C.S.

Europe
EURUSD (1.3575) • EURUSD is trading back to early week levels with a 1.35 handle after yesterday’s North American losses completely reversed Tuesday’s surge higher. Currently, EUR is off 0.2%, leaving it in the middle of the performance charts. With this week’s failure to trade below the 1.35 level, EURUSD has broken the steep downtrend resistance level off of the January 14th intraday high (actually achieved with Tuesday’s surge), however the pair is currently trading back below this previous resistance level. While 1.3800 looks to hold some stiff topside resistance, it appears that a trade through the 1.3850 is required to turn the environment more bullish on the euro. S.T.
GBPUSD (1.5600) • The GBP is a laggard today, trading down 0.4% to break the short-lived uptrend that had seen higher intraday lows for GBP over the previous four sessions. The UK earned a rather dubious accolade today by recording its first January budget deficit since 1993, as January is normally a peak month for tax collection. The data release sent cable down through 1.56 for the first time since

Friday, though GBP has recovered some marginal ground since then. Intraday support for GBP has
held in the 1.5550 to 1.5570 range over the past two weeks, though the slight uptrend in cable
has now been nullified, exposing further downside weakness. S.T.
EURNOK (8.0485) • The krone is the weakest performing currency today, down 0.7% against
the USD and 0.5% against EUR. This has sent EURNOK shooting higher off of support at 8.00
after the pair hit its lowest level since September of 2008. Norway was negatively impacted by the release of the Norwegian statistics office’s economic forecast that downgraded the 2010
growth outlook for the mainland economy (ex oil, gas and shipping sectors) by 0.2 percentage points to 2%. The 2-year Norwegian interest rate swap has fallen sharply from yesterday, down 6.5 basis points, leaving the rate down nearly 25bps from the early January 2010 high at 3.5%. S.T.
Asia / Oceania
USDJPY (90.80) • The yen is gaining back ground after yesterday’s surge in USDJPY that sent the
pair through its 50-day moving average, though long term downtrend resistance remains well
above at 92.90 today. The Bank of Japan refrained from enacting monetary policy changes as neither the interest rate, lending measures nor asset purchase schemes were altered. There seemed to be some degree of push back from Governor Shirakawa against the government’s public pressure for the BoJ to do more to fight deflationary forces in Japan.
Shirakawa put the focus back on the government suggesting that it is important for the overnment to focus on fiscal consolidation and respect the monetary policy goals of the BoJ. S.T.

Commodities

Oil (76.60) • Crude is lower from yesterday’s close as API gasoline inventories rose to their highest since March 1999. Expectations are that the Department of Energy will show a 1725K build in their inventories for the week ended February 12th. S.T.
Gold (1106.85) • Gold has recovered from weakness in Asian and European trading after esterday’s sharp sell-off on the news that the IMF has 191.3 metric tonnes left to sell on the open market.
The IMF said that the sales will take place in a phased manner over time, which should help to offset any impact on the metal’s supply demand dynamics. However, this price collapse has broken the sharp eight session uptrend that had been in play since February 8th.
Psychological support holds near $1100 today.
S.T


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