Forex Weekly After Action Report

This forex trading week has come and gone. Time to assess which currencies and/or pairs were on the move and what moved them. Were you able to profit from any of this week’s top movers?

Top Forex Movers for the Week Ending September 25, 2015

Just one glance at the table above and you can immediately tell that forex traders had their sights on the Aussie and the pound this week. In addition, you can probably tell that the Aussie and the pound were both at the receiving end of a beat-down from their forex rivals.

But why were the Aussie and the pound so weak? Well, read on and find out!

Let’s start with the Aussie. As a high-yielding comdoll, the Aussie immediately and naturally felt some selling pressure at the very start of the forex trading week due to the risk aversion which pretty much defined most of the trading week.

But it wasn’t until Tuesday, especially during the London forex session, that a horde of sellers began to overwhelm the Aussie, which was rather weird since Australia’s house price index posted a better-than-expected reading at the time. Incidentally, the only other catalyst that came out shortly before the Aussie’s slide was a well-circulated IMF report, which claimed that Australia would be the hardest-hit advanced economy due to slowing Chinese investment growth.

Wednesday was an even worse day for Aussie pairs since the preliminary reading for Caixin-Markit’s manufacturing PMI showed contraction in the Chinese manufacturing sector, which means even less demand for Australian commodity exports such as iron ore. This nasty piece of news likely convinced both Asian and U.S. forex traders to go on an Aussie selling spree, but the European forex traders weren’t too convinced since commodities were staging a rally during Wednesday’s London forex session.

Early Thursday was no better since the the Australia and New Zealand Banking Group (ANZ) decided to break its vow of silence and began proclaiming in a loud voice that the Reserve Bank of Australia (RBA) would need to cut rates to 1.5% in 2016. Fortunately for the Aussie, forex traders began unwinding some of their short positions ahead of U.S. Fed Chairperson Janet Yellen’s speech, allowing Aussie pairs to regain some of their losses. Risk appetite then began to make a comeback after Fed Yellen hinted to the market that a rate hike within 2015 is still in the cards.

AUD/USD 1-hour Forex Chart

AUD/USD 1-hour Forex Chart

AUD/NZD 1-hour Forex Chart

AUD/NZD 1-hour Forex Chart

AUD/JPY 1-hour Forex Chart

AUD/JPY 1-hour Forex Chart

As for the the high-yielding pound, it actually started the trading week on a steady footing despite the risk-off sentiment on Monday. Heck, it even managed to win out against some of its forex rivals. But then, a tidal wave of sellers began to hit pound pairs across the board when the reading for public sector net borrowing in the U.K. was released during the September 22 London forex session. Okay, it wasn’t really a tidal wave, but I’m trying to be dramatic here.

Getting back on topic, one look at the report, and you immediately know that it was bad, but the long-term implications make it even worse since the £12.1 billion deficit is the largest August deficit ever since 2012. This, together with the U.S. Fed’s recent decision to delay a highly anticipated September rate hike, and U.K. CPI falling to zero in August, among other things, probably made forex traders doubt the timing of the Bank of England’s (BOE) Q1 2016 rate hike. And this crumbling belief in a Q1 2016 rate hike pretty much became the pound’s main driving force for the rest of the forex trading week, so much so that most media outlets kept pointing to it again and again.

GBP/USD 1-hour Forex Chart

GBP/USD 1-hour Forex Chart

GBP/JPY 1-hour Forex Chart

GBP/JPY 1-hour Forex Chart