Monthly GDP report
On Wednesday at 1:30 pm GMT Canada will print its monthly GDP report. Growth came in at 0.0% for the month of October and caused minimal reaction from the major Loonie pairs (probably because it was also holiday season).
A quick look at the last six releases tells us that growth is just as likely to print higher figures than lower ones than the previous releases.
With Bank of Canada hinting that tightening is still the more likely next step for the central bank, an upside surprise could break the Loonie’s ranges from last week and encourage more gains against the Greenback.
On Wednesday at 2:00 am GMT the Donald will conduct his first ever State of the Nation address.
If the POTUS uses the opportunity to reiterate his tough stance on trade negotiations as many are fearing, then we might see the Canadian dollar lose ground across the board.
But if he emphasizes the progress that’s been made with negotiations, then we might see price action similar to last week’s where upbeat remarks provided the comdoll some support.
Last Week’s Price Review
Like last week, the Loonie’s price action this week was another chaotic mess. Also like last week, the Loonie is on course to closing out the week as a net loser.
Looking at the overlay of CAD pairs above, we can see that only USD/CAD was taking directional cues from the rise in oil prices. As for the other Loonie pairs, not so much.
And unfortunately, most analysts only focus on USD/CAD’s price action to describe the Loonie’s price action, without really considering the Loonie’s price action across various pairs to get a better understanding of what drove the Loonie’s price action.
Anyhow, if we remove USD/CAD from the overlay of CAD pairs, we can also see that the Loonie was practically range-bound for the most part yet again.
Moreover, there was diverging price action on Loonie pairs, which implies that the Loonie was vulnerable to opposing currency price action yet again.
As to why directional movement on the Loonie was limited again this week, that’s very likely due to ongoing NAFTA-related uncertainty.
In fact, the Loonie did see shorts bouts of uniform price action when NAFTA-related headlines popped up.
We can see, for example, that the Loonie saw broad-based selling pressure during Wednesday’s U.S. session when the final round of NAFTA talks started, and all the more so, given that Trump was quoted as saying at the time that (emphasis mine):
“NAFTA is moving along pretty well. I happen to be of the opinion that if it doesn’t work out, we’ll terminate it.”
Another clear example is the Loonie’s broad-based (except against USD) jump on Thursday, when word got around that Canada and Mexico were upbeat on the progress in NAFTA talks and Trump also chimed in to say in a CNBC interview that (emphasis mine):
“Will it be renegotiated? We’re trying right now.”
“I think we have a good chance, but we’ll see what happens.”
The Loonie’s jump quickly lost steam and the Loonie’s price action became a mess, likely because there were rumors floating about that the U.S. is taking a hard stance in talks, contrary to the public display of officials involved in the talks.