Major Currency Pairs Analysis: June 24, 2013

European Union leaders will this week attempt to stave off a resurgence of market tremors, after talks on setting up unified banking rules broke down. Negotiations among the 27-member bloc’s finance ministers stalled yesterday in Luxembourg, after they tried to reach agreement on assigning losses at failing banks as part of proposed rules on bank resolution and recovery. They will regroup June 26, before EU leaders gather the next day for a summit meeting in Brussels. The European leaders’ failure to forge ahead with a so-called banking union that was agreed on almost a year ago, has underscored the frustrations in overcoming a crisis now in its fourth year. With global markets jolted last week on concern over the possible tapering of U.S. stimulus, euro-area leaders that relied on market calm over the past year may have less leeway.
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GBP/USD
The U.K pound fell for a second day, pushing 10-year yields to the highest level in 15 months, as speculation the Federal Reserve will reduce debt purchases reduced demand for fixed-income securities. Ten-year gilt yields headed for their biggest weekly increase since January 2009, while the spread over similar-maturity bunds expanded for a fifth day. Sovereign bonds across the world have tumbled since June 19, when Fed Chairman Ben S. Bernanke said policy makers may begin paring asset purchases this year and end them in mid-2014. The pound weakened against the dollar.
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USD/JPY
The yen may strengthen to a two-week high versus the dollar based on resistance levels before Japan’s currency resumes a bearish path, according to JPMorgan Chase & Co., citing trading patterns. The USD/JPY can correct a bit more over the short term and retrace into the 87.80/86.80 yen zone, Niall O’Connor, a technical analyst at JPMorgan Securities, wrote in an e-mail. Over the next two months, O’Connor predicted the yen will weaken to around 92.25, the lowest level since June 2010.
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USD/CAD
The Canadian dollar fell to an almost two-year low after the nation’s May inflation rate accelerated at a slower rate than economists forecast, and retail sales for April rose less than projected. The currency registered its biggest weekly decline since September 2011, as the consumer price index gained 0.7 percent in May from a year ago, following a 0.4 percent April gain that was the slowest since October 2009. Retail sales added 0.1 percent, Statistics Canada said from Ottawa. The currency dropped versus the majority of its most-traded counterparts as crude oil, the country’s biggest export, erased earlier gains. The loonie, as the Canadian dollar is known, fell 0.7 percent to C$1.0450 per U.S. dollar.
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