Type One exchange rate movements reflect changes in the aggregate demand for Canadian goods and services. Type Two movements reflect other factors. The key point is that these two types of currency movement have different implications for monetary policy. In general, there's less of a need for monetary policy to respond to a Type One movement than to a Type Two movement.
But just to make life interesting for central bankers, both types of movement may occur at the same time. Interpreting currency movements is not a science; it requires judgment.