Economists at TD Securities discuss the outlook of the EUR/USD, USD/CAD and USD/JPY pairs.

Key support for S&P 500 aligns at 3950

“We have been biased to a tactical move lower in EUR/USD for some time. We continue to view 1.05 as the first major reassessment point for this bias, though we note that the 200-DMA will be rather crucial support. For USD/CAD, this point is 1.37 though we think this may could push higher if stocks fail to hold key supports (we think the key level here will be 3950 in the S&P 500).”

USD/JPY risks lean higher for now; 137 will be next key resistance (200-DMA) and is roughly where relative 1y1y OIS differential pit the pair. Failure to hold this resistance will likely need a break of 1.05 in EUR/USD and a push higher in terminal rate expectations (note that both broad USD variation and US/JP 1y1y OIS are solid drivers for USD/JPY).”