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Iran’s sanctions are live this week! How will this, along with other catalysts outside of Canada affect the Loonie’s prices?

Oil price action

As you can see below, the Loonie didn’t really dance to crude oil price’s tune last week. Will the tides change this week?

Crude oil benchmarks slid lower on news that the U.S. is granting eight waivers that will allow “jurisdictions” to gradually reduce their Iran oil purchases beyond the November 4 deadline.

Trump’s admin hasn’t released the list of the eight countries/territories yet, but Japan, India, and South Korea are confirmed to be in it while China might also be negotiating for one.

Let’s see how markets react to these waivers and whether or not they provide retracement or reversal opportunities for crude oil and the Loonie!

Market movers from other major economies

Canada might not be printing top-tier reports this week, but the Loonie could still see volatility in the next couple of days.

The results of the U.S. mid-term elections, for example, could affect the demand for the dollar cause volatility among its counterparts.

Ditto for any significant Brexit development, which could herd the bulls away from other high-yielding currencies and into euro and pound-denominated assets.

And then there’s the upcoming FOMC statement, which could remind market players that the Fed is on track to raise its rates again in December. If Governor Powell and his team maintain their hawkish remarks, then the Greenback could rocket and leave its counterparts eating dust.

Last Week’s Price Review

The Loonie was unable to add to last week’s BOC-induced gains since the Loonie is currently mixed but a net loser for the week (as of 5:00 pm GMT).

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

The Loonie didn’t really track oil prices very closely this week. Also, the Loonie’s price action was rather messy, especially during the later half of the week, which implies that the Loonie became vulnerable to its peers during the later part of the week.

With that said, oil prices fell yet again this week, thanks to signs of higher oil output amid weaker global growth prospects, market analysts say.

However, the Loonie remained resilient on all CAD pairs from Monday until Wednesday, before becoming more mixed come Thursday.

But why was the Loonie able to resist the slide in oil prices? Well, as noted in Monday’s Asian session recap, the Loonie may have been cushioned by the risk-friendly vibes. Other market analysts were also saying the same thing.

Risk-taking was also the dominant sentiment on Tuesday (and for whole week for that matter), so the Loonie remained resilient.

The Loonie also reacted positively to BOC Boss-Man Poloz’s hawkish comment that:

“The policy rate will need to rise to neutral to achieve our inflation target. That said, the appropriate pace of increases will depend on our assessment at each fixed announcement date of how the outlook for inflation and related risks are evolving.”

Poloz’s comment is actually just a rehash of last week’s BOC statement, but that’s still a hawkish statement nevertheless. It also probably helped that oil was in recovery mode at  the time.

Moving on, Canada’s stronger-than-expected monthly GDP reading (+0.1% vs. 0.0% expected) also apparently helped to shield the Loonie when oil resumed its decline on Wednesday.

However, the Loonie’s price action became a mixed mess when Thursday rolled around since the Loonie traded sideways against the euro and the Swissy, captured more ground from the yen and the Greenback, but lost ground to the pound, the the Kiwi, and the Aussie.

The Loonie’s price action became somewhat uniform again on Friday since the Loonie jumped higher (except against AUD and NZD) when a Bloomberg report cited “four people familiar with the matter” as claiming that Trump “has asked key U.S. officials to begin drafting potential terms” for a trade deal with China.

However, the Loonie would give back those gains ahead of Canada’s jobs report.

And when Canada’s jobs report was finally released, that revealed that the Canadian economy only generated a net of 11.2K jobs in October, which is a swing and a miss since the market was expecting a 12.5K increase. And so the Loonie weakened on most CAD pairs as a knee-jerk reaction.

However, a closer look at the details show that 33.9K full-time jobs were actually created, so the weaker-than-expected jobs growth was not too bad, which is probably why follow-through selling was only limited. Heck, the Loonie even recovered on some pairs.