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Will NAFTA updates, crude oil prices, and domestic data dictate the Loonie’s price action again this week? Here are the potential catalysts!

IVEY PMI (Aug 7, 2:00 pm GMT)

Last month’s IVEY PMI was printed AFTER Canada’s jobs report was released, so it lost its leading indicator status. This time around the report is scheduled a few days earlier.

For newbies out there, know that markets usually react to the IVEY PMI release since the survey tends to show sneak peeks of what the labor market (and to an extent, the economy) is up to before the official figures are released.

Analysts expect the index to improve from 63.1 to 64.2 in July. USD/CAD is flirting with a major psychological handle, so significant hits or misses could set the Loonie’s trend in either direction.

Labor market numbers (Aug 10, 12:30 pm GMT)

Canada reported a cool 31,800 net increase in jobs in June, which caused a spike in the Loonie’s prices.

The bears soon stepped in, however, when traders saw that wage growth fell by 0.30% and marked its second monthly decline. What’s more, the unemployment rate actually inched higher from 5.8% to 6.0%!

This week analysts are seeing a net increase of only 17,500. Unemployment rate is expected to slip to 5.9%, though, with participation rate inching lower from 65.5% to 65.4%.

Unless global trade headlines dominate the Loonie’s price action, expect to see the Loonie react from the report. Just don’t forget to factor in profit-taking moves, aight?

Global trade, crude oil updates

Optimism over NAFTA negotiations and oil price action pushed the Loonie to its second consecutive winning week last week.

This week pay close attention to updates on Mexico hammering out a deal with the U.S. on autos. Progress on the U.S.-Mexico talks could lead to progress for NAFTA talks, so make sure you’re updated!

Meanwhile, word on the hood is that the U.S. is set to announce new sanctions on oil producer Iran. This, combined with Saudi’s latest output decline, could continue to push prices (and the Loonie?) higher throughout the week.

Last Week’s Price Review

The Loonie is currently this week’s champion (as of 5:00 pm GMT). Wow! That means we may soon see the second week of total Loonie domination. Moreover, the Loonie has been a net winner in five of the last six weeks.

Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart

At first glance, it looks like the Loonie decoupled from oil prices. However, the Loonie was indeed taking some directional cues from oil prices. It just so happens that positive Canadian economic data and positive NAFTA-related news got in the way.

As for specifics, oil slumped hard on Tuesday because of higher OPEC oil output, market analysts say.

The Loonie took a hit but was able to quickly get back on its feet and soldier on, apparently because of Canada’s stronger-than-expected GDP report, which showed that the Canadian economy grew 0.5% month-on-month in May, beating the +0.3% consensus (+0.1% previous).

Oil continued to slide on Wednesday, and market analysts once again pinned the blame on higher OPEC oil output, although they also pointed to trade-related jitters.

The Loonie remained resilient, though, trading sideways or grudgingly dipping whenever oil fell, but climbing higher when oil prices rose, which is a sign that dip demand was ever present.

The Loonie may have been feeding off the other currencies’ weakness since the Aussie, the Kiwi, and the yen had their own problems to deal with on Wednesday.

However, the Loonie likely got genuine demand during Wednesday’s U.S. session, thanks to comments from Guillermo Malpica Soto, Mexico’s Head of Trade and NAFTA Office, namely that the U.S. supposedly had “started showing more flexibility last week,” adding that they “are getting close” to hammering out a deal on rules of origin for autos, which has been a major obstacle in NAFTA talks for some time now.

Shortly after Malpica spoke, Colin Bird, Canada’s trade negotiator, would echo this message when he said that the “US, Canada, Mexico were very close on auto rules of origin.”

The positive NAFTA-related vibes then likely allowed the Loonie to sail higher on most pairs after that, even as oil prices continued to tumble.

Oil finally staged a strong recovery on Thursday, thanks to speculation that oil inventories will drop, market analyst say. And the Loonie, quite naturally, was along for the bullish ride.

The Loonie began trading sideways when Friday rolled around, though, likely because oil prices were trading sideways, although caution ahead of the NFP report and Canada’s trade report may have also been a factor.

At any rate, CAD pairs (except CAD/JPY) finally resumed their upward push when Canada’s June trade report was released since that revealed that Canada’s trade deficit narrowed to from $2.7 billion to just $626 million, thanks to exports surging by 4.1% to a record high of $50.7 billion.