Top Forex Market Movers of the Week (Jan. 11-15, 2016)

The forex trading week has come and gone. Time to take a look at the currencies and/or currency pairs that were on the move and what moved them. Were you able to profit from any of this week’s top movers?

Top Forex Weekly Movers (Jan. 11-15, 2016)

Top Forex Weekly Movers (Jan. 11-15, 2016)

Loonie weakness was the name of the game for this forex trading week, with yen and Greenback demand, as well as pound weakness, as secondary themes. Well, let’s dive right in and see what was driving forex price action this week, shall we?

Oil Slump Intensifies

  • U.S. WTI crude oil down (CLG6) by 10.43% to $29.70 per barrel for the week
  • Brent crude oil down (LCOH6) by 12.85% to $29.23 per barrel for the week

Oil was down and out for the count during the trading week, with both U.S. crude oil and Brent crude oil closing below $30 per barrel at 12-year lows. As a natural consequence of the oil slump, the Loonie got a major beatdown from ALL of its forex rivals, including the other high-yielding comdolls.

CAD vs. NZD & AUD

CAD vs. NZD & AUD

And if you’re wondering what oil has to do with Canada, then scoot on over to our School’s lesson on How Oil Affects USD/CAD. The gist of it all, though, is that crude oil accounts for almost 20% of Canadian exports, so large declines in oil prices is gonna hurt Canada’s economy and the Loonie bad. In fact, the 2014 and 2015 slump in oil prices are already hurtin’ Canada’s economy bad.

USD/CAD 1-hour Forex Chart

USD/CAD 1-hour Forex Chart

Anyhow, oil started sliding on Monday due to jitters over China’s slowing economy amidst another drop in Chinese equities, which threatened to further unbalance the demand side of the oil market equation. Oil prices stabilized after that, as sentiment began to recover. But the slump resumed with great gusto on Friday when speculation began to run rampant that the International Atomic Energy Agency (IAEA) will give Iran its seal of approval on meeting the guidelines for Iran’s nuclear program, which would lift the sanctions currently being imposed on Iran. This would then open the way for Iran’s entry (or reentry) into the global oil market, which would potentially wreak further havoc on the current oil glut.

Yet Another Global Equities Rout

  • Shanghai Composite (SSEC) down by 8.96% for the week
  • Japan’s Nikkei 225 (N225) is down by 3.11% for the week
  • Hong Kong’s Hang Seng (HSI) is down by 4.56% for the week
  • FTSEurofirst 300 (FTEU3) is down by 3.24% for the week
  • DAX (GDAXI) is down by 3.09% for the week  
  • DOW (DJI) is down by 2.19% for the week
  • S&P 500 (SPX) is down by 2.17 % for the week

Just like last week, global equities were still in full retreat, with Chinese equities still leading the way. The drops across the board were less pronounced when compared to the previous week, however, since China stepped up its efforts to improve market sentiment and China reported a better-than-expected reading for its trade balance (and perhaps there was some profit-taking on the side as well).

The oil price slump was also taking its toll on market players, causing all stock indices to fall on Friday, with the S&P 500 falling to the lowest level ever since October 2014 while the Hang Seng was down to lows never seen since September 2012.

The bloodletting in the global equities market signified significant and continued risk aversion in the global markets, which makes for a toxic environment for the higher-yielding currencies like the pound and the comdolls (AUD, NZD, CAD). On the flip side, the risk-off environment spooked forex traders and other market players to flee to the sweet embrace of the safe-havens (JPY, CHF, USD) for protection, with the Japanese yen acting as the go-to safe-haven currency of choice (as usual).

U.K. Industrial Production Readings

  • Industrial production m/m: -0.7% vs. 0.1% expected, 0.1% previous
  • Industrial production y/y: 0.9% vs. 1.7% expected, 1.7% previous
  • Manufacturing production m/m: -0.4% vs. 0.1% expected, -0.4% previous
  • Manufacturing production y/y: -1.2% vs. -0.8% expected, -0.2% previous

Risk aversion was not the only driver for the pound’s weakness to most of its forex rivals since the U.K. had a handful of mid and top-tier reports/events during the trading week. The question, of course, is which of ‘em had the biggest impact on the pound. And looking at the charts, it seems that the U.K. industrial and manufacturing production report for the November period was one of the main catalysts for the pound’s weakness. It becomes even more apparent when you put an overlay of the comdolls (AUD and NZD), which were showing weakness to the pound, over GBP/USD.

GBP/USD 1-hour Forex Chart

GBP/USD 1-hour Forex Chart

I noted in my commentary during Tuesday’s morning London forex session recap that the poor readings probably convinced forex trades that Q4 U.K. GDP growth will be dragged down, but it’s also possible that the poor readings made forex traders think that BOE officials would be more dovish in the MPC meeting minutes on Thursday. But BOE officials didn’t sound terribly dovish, which probably caused those same traders to cover on their pound shorts, causing the pound to move higher (at the time) in the process.

Do you think these catalysts were enough to spark longer-term forex trends? Better keep these market themes in mind when planning your trades for next week!