It's a busy week for data out of Canada, and with the BoC meeting next week, the market will be particularly mindful of how each report could sway the Bank's decision about whether or not to cut the policy rate again. However, oil prices are an unquestionably important part of their outlook, and contain more forward looking information about activity trends in the coming months. So, after having made some dramatic moves over the past few weeks, crude certainly has the potential to take the attention away from data releases in the week ahead.

For this week's main report-Q2 GDP-the market is prepared for a soft print that disappoints what the BoC forecast at their latest MPR (-0.5%q/q ann). For the other two key releases-trade and labour-expectations are equally as downbeat. If all that comes to fruition, it would add marginally to the elusive rebound story in Canada, although what's important for CAD is how that could shift pricing for BoC policy. For the past couple weeks, another rate cut has been fully priced in for the October/December meetings (hovering between 80-100% priced into the BAX and OIS markets).

With that in mind, dramatically disappointing data is expected and another turn lower in oil prices to see considerable downward pressure on CAD. Altogether, fundamentals still leave us biased toward further CAD weakness into the end of the year (particularly against USD and GBP), but a lot of bearishness is already priced in.

"We are keeping a close eye on oil this week, and if we continue to see an extension of this sharp bounce, the best trade opportunities could be in pairs where we like being long CAD. Long CAD vs. AUD and NZD are the two we like in particular. In AUD/CAD we look to sell rallies toward 0.9530 or a close below 0.9400, with a stop above 0.9680. In NZD/CAD we like selling any small rallies with a stop above 0.8700", says RBC Capital.