The Canadian Dollar starts the new week with a bid against the Pound and US Dollar but is lower against the Euro.

The GBP/CAD is at 1.6279, the USD/CAD is at 1.3105 and EUR/CAD is at 1.3856.

Looking at the technical outlook, we note GBP/CAD is still within the recent, broad consolidation range.

The GBP rose to test trend resistance off the late 2016 high earlier but appears to have firmly rejected the 1.6460 area.

“Daily patterns are soft but intraday signals are more obviously bearish, key reversal session on the 6-hour chart, and we pay attention to strong, short-term signals around key, long-term technical points,” says Shaun Osborn at Scotiabank in a written briefing to clients.

Osborne argues price action suggests near-term risks are tilting back towards a retest of the 1.62 area, the short-term range base.

Regarding EUR/CAD, Osborne notes daily trend intensity signals are bearish but the shorter and longer-term oscillator signals are conflicted and flattish, suggesting no real trend bias here either way.

Meanwhile, USD/CAD does not reflect a whole lot of conviction in the short-term timeframe and is likely to maintain a touching distance with current levels.

Watch Month-End Flows for USD/CAD Direction

“Anecdotal evidence suggests that month-end flow in FX markets is significant and that at least part of that flow reflects equity managers adjusting hedges to account for month-to-date returns,” says Adam Cole at RBC Capital Markets in London.

Research by RBC Capital shows there to be a clear tendency for USD/CAD to fall on the last day of months where equity returns are positive and vice versa, particularly so when the change in equity prices is large.

The rationale for this is that rising prices raise the value of foreign investors’ US equity holdings, leaving a requirement to sell USD forward for the proportion of portfolios that is hedged.

“US equities are up 3.9% MTD, sufficient to trigger USD selling signals against GBP, AUD, CAD, and NOK from our month-end hedging model,” says Cole.

It is noted that the month-end flow model is quite consistent for both the GBP and CAD.

Bank of Canada and GDP Data Release on the Calendar

“We expect it to retain its cautious tone and reiterate that there remains material excess slack in the economy,” say RBC Capital Markets.

Growth has evolved about as expected by the BoC in the January MPR (BoC has 1.5% for Q4) and terms of trade have improved, but significant uncertainties remain, especially on US policy.

The BoC may also take the opportunity to play down January’s strong headline inflation which comes down to energy price increases and not a real sign of diminishing slack.

All said, the event does not promise any notable upside for the Canadian Dollar.

On Thursday we get Q4 GDP at 13:40 GMT with the market looking for a monthly reading of 0.2% and an annualised read of 2.0%.