USD/CAD remains steady in Tuesday trading. The pair briefly touched above the 1.03 level in the Asian session, but has retracted slightly. The pair was trading in the 1.0280 range. The markets continue to nervous after US lawmakers were unable to come to terms over the budget crisis late last week, resulting in automatic spending cuts. There are no Canadian releases to start off the new week. In the US, the only releases are speeches by two members of the Federal Reserve.
It’s only been a few months since the “fiscal cliff” rocked the US, and another fiscal crisis is brewing on Capitol Hill. The fiscal cliff rattled the markets and sent currencies spinning out of control early in the new year. The US budget crisis was averted but never really went away, and the newest installment is called “sequestration”. Democrats and Republicans picked up where they left off in January, failing to reach agreement and then point fingers at each other for the impasse. This past Friday, meanwhile, $85 billion in automatic spending cuts kicked in. The core issues, spending cuts and tax reforms, have not changed and continue to divide US lawmakers along party lines. Republicans want to make major cuts to federal social programs such as Medicaide, while Democrats insists on tax hikes as part of any deficit reduction plan. The negotiations are set to continue on Capitol Hill this week, as Congress tries to break the budget impasse.
In Italy, the political deadlock continues. Beppe Grillo, head of Italy’s Five Star Movement, was in the weekend headlines after suggesting that Italy hold a referendum on whether to remain in the Eurozone. Italy’s is staggering under a debt of two trillion euros, and Grillo has called for the country to renegotiate the debt. Grillo, who led his party to a stunning showing in last week’s election, can now play kingmaker in any coalition talks, and his anti-euro rhetoric can no longer be dismissed. The political picture remains a stalemate, and if there is no progress soon, we can expect talk of new elections in June to get louder. Continued uncertainty in Italy is bad for the markets, and if the political quagmire continues, we can expect the safe-haven US dollar to make gains at the expense of currencies like the Canadian dollar.
USD/CAD for Monday, March 4, 2013
USD/CAD March 4 at 14:10 GMT
1.0286 H: 1.0310 L: 1.0271
USD/CAD is trading in a narrow range. The pair flirted with the 1.03 line, but was unable to sustain any upward momentum. The pair is facing strong resistance at 1.0361. On the downside, the line of 1.0282 has come under a lot of pressure and this could continue. The next support level is at 1.0229.
- Current range: 1.0282 to 1.0361
Further levels in both directions:
- Below: 1.0282, 1.0229, 1.0157, 1.01, 1.0041, 1.00 and 0.9940
- Above: 1.0361, 1.0446, 1.0523 and 1.0642
OANDA’s Open Position Ratios
The USD/CAD ratio has picked up where it left off before the weekend, as it continues to point to long positions. Although we are not currently seeing the pair push higher, the activity in the ratio could be an indication that the US dollar will gain some momentum push back above the 1.03 line.
The US dollar continues to press against the Canadian currency, and the US budget impasse and the political drama in Italy are weighing on the Canadian dollar. We can expect both of these situations to remain fluid, so the loonie could post some losses as investors opt to stick with the safe-haven US dollar.
- 13:00 US FOMC Member Janet Yellen Speaks.
- 18:15 US FOMC Member Jerome Powell Speaks.
*Key releases are highlighted in bold
*All release times are GMT
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