Forex Flash: Narrower US-Canada yield spreads may extend CAD slide further – TD Securities

Since December, US 10-year yields have been tracking higher since December and nudging up towards 2.00% again, eroding Canada’s yield premium at the long end of the curve in recent weeks (more or less flat to the US right now). "Short-term term spreads have steadied in the middle of the trading range of the past few months", wrote TD Securities analysts Shaun Osborne and Greg Moore, adding that while better US numbers are broadly positive for Canada’s economic prospects (and the CAD, by extension), narrower yield spreads over the USD do suggest that the gentle slide in the CAD seen recently may extend a little further". Also, the free-trade talks between Europe and Canada are nearing completion, but they're not expected to have a material impact on the market.

In regard to the USD/CAD, "chart patterns do look a bit soft in the short run and better selling in Europe suggest some risk of a push lower intraday", they wrote, pointing to good support in the 0.9990/1.00 area (200-day MA at 0.9991). "We still prefer to buy USD dips though", they wrote.