Top Forex Market Movers of the Week (May 9-13, 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 (May 9-13, 2016)

Top Forex Weekly Movers (May 9-13, 2016)

Price action was a bit choppy during this trading week and directional movement wasn’t very strong since the #1 mover of the week only gained by 1.43%. Anyhow, the list of top movers above and the list of how Greenback pairs performed below shows that the Greenback was this week’s top dog.

The Majors Ranked (May 9-13, 2016)

The Majors Ranked (May 9-13, 2016)

You can also probably glean from list of top movers that the Aussie and the Japanese yen were the two main losers. If it’s  not very clear, then just look at how Aussie and yen pairs performed below.

Aussie Pairs Ranked (May 9-13, 2016)

Aussie Pairs Ranked (May 9-13, 2016)

Yen Pairs Ranked (May 9-13, 2016)

Yen Pairs Ranked (May 9-13, 2016)

Oh, if you’re getting a sense of déjà vu, that’s probably because Aussie weakness and U.S. dollar strength were also the main themes last week. So, what was driving forex price action?

JPY: Risk Appetite & Threats of Intervention

USD/JPY: 1-hour Forex Chart

USD/JPY: 1-hour Forex Chart

As you can see on the chart above, the yen substantially weakened across the board on Monday and Tuesday before trading mostly sideways on Wednesday and finally starting to recover during Thursday’s U.S. session. So what happened then?

Well, as the heading above says, risk appetite was the dominant sentiment on Monday and Tuesday and there were talks about possible intervention from Japanese officials. And as y’all should know by now, the yen is considered a safe-haven currency, so bouts of risk appetite usually hurts demand for the yen while bouts of risk aversion tend to send forex traders crying in fear to the yen. Also, the yen has been relatively strong in recent months, but the BOJ has refused to do something despite calls for more, so talks about possible intervention from Japanese government officials tend to spook yen bulls.

Having said that, risk-taking on Monday mostly occurred in the Japanese and European markets while the U.S. market was more mixed. In Japan, market analysts attributed Monday’s risk-on sentiment to Japanese Finance Minister Taro Aso’s warning that further yen appreciation may convince Tokyo to finally intervene. In Europe, meanwhile, risk-taking was apparently inspired by the better-than-expected reading for German factory orders (1.9% vs. 0.7% expected, -0.8% previous), which allowed German equities to outperform while leading other European indices higher.

The risk-on vibes on Tuesday was more global, thanks to a surge in oil prices, although there was also some more localized events. In the case of Japanese markets, we got another round of intervention talks from Aso, although Koichi Hamada, a special adviser to Prime Minister Shinzo Abe, also said thatIn case the yen happens to be so firm that it becomes between 90-95 yen per dollar, then Japan would have to intervene even if it angers the United States.” As for European markets, sentiment was lifted by positive earnings reports and progress in Greek talks with regard to how Greece is meeting its obligations.

Okay, we’re done covering the yen’s weakness, so let’s switch to what was driving the Aussie lower. But before that, I pointed out earlier that the yen traded sideways on Wednesday before starting to recover on Thursday, and that’s a major clue as to why the Aussie was weak during the week.

AUD: Risk Aversion Returns & Iron Ore Falls

The Aussie is a higher-yielding currency, so forex traders tend to flock to it during periods of risk appetite. But if risk sentiment deteriorates, forex traders usually abandon the Aussie for safe-haven currencies like the Japanese yen. Also, iron ore is a major Australian export. It’s basically what oil is to oil-producing countries like Canada or Saudi Arabia, so a decline in iron ore prices is bad for the Australian economy, and hence, the Aussie.

AUD/USD: 1-hour Forex Chart

AUD/USD: 1-hour Forex Chart

With that out of the way, Aussie pairs were mostly on the up and up on Monday and Tuesday, thanks to the risk-on sentiment at the time, which I already discussed. Risk sentiment started to sour on Wednesday, however, thanks to poor European earnings reports, as I discussed in Wednesday’s morning London session recap. I also noted then that commodities were soaring, which is why the Aussie’s was mostly trading sideways then.

However, risk aversion persisted on Thursday and iron ore slumped hard after rising for three days, due to the implementation of strict measures meant to limit speculative buying in Chinese exchanges that ultimately saw iron ore (62% content) to close 4.99% lower for the week after closing 8.45% lower during the previous week. A double whammy for the Aussie indeed.

Okay, we’re done with the two losers, so let’s discuss this week’s champ – the U.S. dollar.

USD: JPY Weakness & Upbeat Retail Sales Report

USD/JPY: 1-hour Forex Chart

USD/JPY: 1-hour Forex Chart

If you look at the chart above, you’ll notice that the Greenback was ranging against most of its forex rivals from Monday to Tuesday, with the clear exception of the Japanese yen, which was badly losing out to it, so the Greenback was definitely exploiting the yen’s weakness at the time. After that forex traders seem to have lost interest on the Greenback, so it milled about while slightly dipping across the board due to profit-taking, according to most analysts.

The Greenback then received some bullish interest again during Thursday’s U.S. session, thanks to upbeat rhetoric from FOMC officials. The Greenback had little luck against the yen, however. But that changed on Friday when the U.S. retail sales report for April came in better-than-expected (1.7% vs. 0.8% expected, 0.3% previous), as Forex Gump suggested that it would in his Forex Trading Guide for that event. But risk aversion persisted in the U.S. market so the Greenback was pulled back down against the yen, but the upbeat retail sales report was the one catalyst that allowed the Greenback to end the week on a higher note against its other forex rivals.

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