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Last week, the Loonie finally got a taste of victory after five consecutive weeks of net losses.

Unfortunately, the Loonie wasn’t able to build on last week’s gains and is currently the second biggest loser of the week (as of 6:00 pm GMT).

And the Loonie is down in the dumps again mainly because of the slump in oil prices, although mostly disappointing Canadian economic reports also helped in kicking the Loonie lower.

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’s price action looks a bit messy, especially during the later half of the week. However, that’s only because the Aussie and the Kiwi got hit hard in the aftermath of the FOMC statement.

And if we remove NZD/CAD and AUD/CAD from the overlay, then we get this:

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

As you can see, the Loonie was tracking oil prices rather closely this week. And since oil benchmarks tanked, so did most CAD pairs.

As to why oil got whupped this week, market analysts say that doubts are growing that OPEC’s oil cut deal will be enough to offset the record levels of oil output from the U.S., Saudi Arabia, and Russia, especially since the equities rout is also making investors concerned about future global growth (and demand for oil).

Aside from slumping oil prices, Canada’s disappointing economic reports also had (minor) roles in kicking the Loonie lower.

Canada’s disappointing CPI report, for one, gave the Loonie a noticeable bearish slap even as CAD pairs tracked recovering oil prices at the time.

The monthly and annual headline readings were actually within expectations, but the CPI report was poor overall since 2 out of 3 of the BOC’s preferred measures for underlying inflation printed weaker readings, which is why the Loonie reacted negatively.

Moving on, the Loonie also had a hard time taking advantage of the recovery in oil prices on Friday, apparently because of Canada’s disappointing retail sales report, which revealed that both the headline and core reading both failed to meet expectations and only 5 of the 11 retail store types reported an increase in sales.

Interestingly enough, Canada’s monthly GDP report was released simultaneously with the retail sales report, but that failed to attract more buyers, even though monthly GDP growth was stronger than expected.