USD/CAD – Loonie Climbs to Four-Week High Against Greenback

The Canadian dollar continues to improve against its US counterpart, as USD/CAD has dropped to the mid-1.01 range late in Wednesday’s European session. The Canadian currency has gained around two cents since the beginning of June, its highest level since mid-May. In economic news, there are three US releases, including the Federal Budget Balance. There are no Canadian releases on Wednesday.

There was some good news for the US from the S&P ratings agency on Monday, as the well-respected firm revised the US sovereign credit rating from negative to stable. This is an important vote of confidence in the US economy, and means that there is less than a 1 in 3 chance of another downgrade in the next two years. S&P noted that a key factor in its revision was the agreement reached in the US Congress which averted the fiscal cliff crisis, which would have led to $600 billion in automatic tax increases and spending cuts and could have pushed the fragile US economy into recession. In 2011, S&P cut the US credit rating from AAA to AA, and the threat of another downgrade has been a concern of the markets. This news will likely improve market sentiment and could give a boost to the US dollar.

The S&P decision could also affect the US Federal Reserve’s QE program, which involves the purchase of $85 billion in assets each month. The Fed has said that it won’t scale back the program before it sees a stronger economy and an improving employment picture. Although US releases continue to be mixed, speculation is rising that the Fed could take action in the next few months. Since QE is US dollar-negative, any tapering of QE could give a boost to the greenback and jolt the currency markets.

Remember the Greek debt crisis, which shook up world markets? In an interesting twist, the IMF admitted making mistakes in the Greek bailout program, in which Greece received EUR 240 billion. The IMF said it failed to deal with private debt restructuring properly and had overestimated the ability of Greek governments to push through economic reforms. The IMF dished out some blame as well, pointing fingers at the EU for “notable mistakes”. For its part, Greece said that the IMF report would not affect the bailout agreement, as the country continues to work towards meeting its deficit reduction targets and getting back on its financial feet.

USD/CAD for Wednesday, June 12, 2013

USD/CAD 1.0165 H: 1.0216 L: 1.0155

USD/CAD Technical

The Canadian dollar keeps moving up, as the pair is currently trading in the mid-1.01 range. USD/CAD continues to receive support at 1.0157. This line has weakened as the pair pushes lower, and could fall if the downward trend continues. The next support level is at the round number of 1.01. On the upside, the pair is facing resistance at 1.0229. This line has strengthened as the pair trades at lower levels. This is followed by a resistance line at 1.0282.

• Current range: 1.0157 to 1.0229

Further levels in both directions:

• Below: 1.0157, 1.01, 1.0058 and 1.00
• Above: 1.0229, 1.0282, 1.0337, 1.0442 and 1.0502

OANDA’s Open Positions Ratio

USD/CAD ratio is not showing any movement, continuing a trend we have seen throughout the week. The pair is currently on the move, as the Canadian dollar continues to post gains against the US currency. If the pair continues to be active, we can expect the ratio to swing into action as well.

The Canadian dollar is enjoying a good week, as it pushes upwards. We can expect some strong movement from USD/CAD on Thursday, with several key events scheduled for release in the US.

USD/CAD Fundamentals

• 14:30 US Crude Oil Inventories. Estimate -1.4M.
• 17:00 US 10-year Bond Auction.
• 18:00 US Federal Budget Balance. Estimate -110.2B.

*Key releases are highlighted in bold

*All release times are GMT

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