Major Currency Pairs Analysis: June 20, 2013

Euro-area finance ministers probably will agree tomorrow on the terms for allowing the European Stability Mechanism to recapitalize banks directly, Europe’s economy chief said. European Union Economic and Monetary Affairs Commissioner Olli Rehn predicted a deal on the matter by finance ministers from the 17 euro nations, when they meet June 20 in Luxembourg. The goal of allowing the 500 billion-euro ($669 billion) ESM, the euro area’s permanent rescue fund, to infuse lenders with emergency aid directly rather than via national governments is tied to plans for a European banking union. The direct-recapitalization option is meant to hasten the end of the three-year-old debt crisis by breaking the link between sovereign debts and banking woes.
EUR/USD" width="624" height="468">
GBP/USD
The pound’s rally to a four-month high against the dollar is proving too much for currency traders whether Mark Carney will step up stimulus efforts when he takes over as Bank of England governor next month. The Sterling’s failure to extend its advance after rising above its 200-day moving average on June 13 may be a signal its winning streak is ending, according to Barclays Plc. The pound is also approaching a key Fibonacci retracement level where sell orders tend to be clustered, while the stochastic oscillator crossed a threshold that implies an imminent reversal. The pound rallied about 5 percent from an almost three-year low of $1.4832 in March as Britain’s economy avoided an unprecedented triple-dip recession and inflation accelerated. While that suggests the Bank of England may pull back from stimulus measures that would debase the currency, Carney has said central banks can do more to aid growth, prompting analysts to forecast more weakness for the pound.
GBP/USD" width="624" height="468">
USD/JPY
The yen may climb to its strongest level in almost four months versus the dollar as it retraces a decline that saw it reach a 4 1/2-year low, according to Bank of America Corp, The yen will stay bullish as it passes through the area from 93.65 to 93.15 before strengthening to 90.91, according to MacNeil Curry, chief rates and currencies technical strategist in New York at Bank of America Merrill Lynch. That would be the yen’s highest level since reaching a monthly peak of 90.88 on February 25. The yen increased 0.3 percent to 95.01 per dollar.
USD/JPY" width="624" height="468">
USD/CAD
The Canadian dollar rose earlier as Bank of Canada Governor Stephen Poloz, in his first public speech said that the nation will need a rebound in business confidence to drive growth in coming years, a process that will require “stability and patience.” It extended the advance after Canadian wholesale sales rose for a fourth month in April, the longest streak of gains in a year, The Canadian dollar fell as its U.S. peer gained versus most other currencies after the Federal Reserve's statement. "The loonie is weakening mainly due to the Fed forecasts that indicate an improvement in the unemployment rate, which could imply higher rates in the U.S. sooner than mid-2015,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia (BNS) in Toronto, said by e-mail. “That has created U.S. dollar strength."
USD/CAD" width="624" height="468">