Top Forex Market Movers of the Week (July 25-29, 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 (July 25-29, 2016)

Top Forex Weekly Movers (July 25-29, 2016)

Since six out of the top ten movers of the week are yen pairs with the yen winning out, it’s pretty much a given that the main theme during the trading week was yen domination. And while it may not be as clear, we also have Kiwi strength and Greenback weakness as secondary themes.

JPY

USD/JPY: 1-Hour Forex Chart

USD/JPY: 1-Hour Forex Chart

JPY Pairs Ranked (July 25-29, 2016)

JPY Pairs Ranked (July 25-29, 2016)

In last week’s Top Forex Market Movers of the Week, I said that the yen’s overall performance for the week was not that impressive, but there was some interesting intraweek price action, which I linked to some BOJ-related shenanigans.

One such shenanigan was rumor about BOJ officials not being too committed on further monetary stimulus, according to some unnamed people who were “familiar with the discussions.”

Well, whoever those unnamed people were, they were right on the money since the BOJ did deliver some form of easing this week, but it was far less than what the market was anticipating, so the yen rallied hard as a result. As usual, I’ll refer you to Forex Gump for the details. You can read his write-up here. He even covers the yen’s wacky antics before the BOJ statement.

Going back to our discussion, BOJ Imperial Shogun Kuroda also made it clear during the BOJ press conference that implementing some form of so-called “helicopter money” was out of the question, saying that (emphasis mine):

“Advanced economies, including Japan, do not conduct monetary and fiscal policies as a set. Such an idea, which includes direct debt underwriting by central banks, is prohibited by law. But when fiscal stimulus is expanded at a time the central bank is maintaining ultra-loose monetary policy to achieve its price target, it enhances the boost to the economy.”

Kuroda did say that that the BOJ plans a comprehensive monetary policy review during the September policy meeting. But “Whether that will affect monetary policy decisions will depend on what the outcome of the assessment will be,” according to Kuroda.

Kuroda also added that (emphasis mine):

We’re not announcing this based on an assumption that we will do something on monetary policy. I am aware some central banks do pre-announce monetary easing. We don’t do such a thing.”

This comprehensive monetary policy review is therefore not a guarantee that the BOJ will be easing further in September.

Before we move on, I would also like to point out that the BOJ statement was not the only catalyst for the yen. As you probably saw on the chart above, the yen also got a bullish boost across the board on Tuesday. This was likely due to Finance Minister Taro Aso’s statement that the Japanese government has not yet decided on the size of Japanese PM Shinzo Abe’s planned fiscal stimulus package, which created uncertainty on the effective of the planned stimulus package, as well as dampening expectations that the BOJ will introduce some form of monetary stimulus. And we already discussed what happened.

USD

USD Index: 1-Hour Forex Chart

USD Index: 1-Hour Forex Chart

USD Pairs Ranked (July 25-29, 2016)

USD Pairs Ranked (July 25-29, 2016)

I told y’all last week to “make sure to lock-in some profits or adjust your stops, just in case the Fed sounds overly dovish or does something unexpected.” And boy was that a good advice since the the Greenback got the stuffing beaten out of it this week.

The USD Index chart that I used above doesn’t show it, but the Greenback was actually a bit mixed during the early part of the week before getting hammered hard across the board when the Fed released its FOMC statement. Forex Gump has a write-up on that, and you can read it here.

The gist of it all is that the Fed said a lot of hawkish things about the economy. However, the Fed refrained from giving hints on when the next rate hike will be. The Fed didn’t even bother trying to present a hawkish tone with regard to the path of monetary policy.

This was apparently taken as a sign that the Fed was not in a rush to hike rates. And Forex Gump supports this thesis by pointing out that the CME Group’s FedWatch Tool showed that the expectations of a September rate hike dipped after the FOMC statement.

Aside from the Fed’s apparent lack of commitment, Forex Gump also noticed that there was “No upbeat remarks on the expected rebound in Q2 GDP growth.” And as it turns out, the Fed didn’t really have much to be upbeat about since the annualized quarter-on-quarter reading for Q2 2016 GDP only came in at 1.2%, missing expectations of a 2.6% expansion by a long shot. Moreover, the reading for Q1 was downgraded from 1.1% to an anemic 0.8%. I guess the “final” GDP estimate wasn’t so final after all, huh? Yeah, that’s a really corny joke. Sorry about that.

Anyhow, Forex Gump already has a write-up on that, so check it out here, if you’re interested on why GDP severely missed expectations, as well as the reason for the downgrades. Yes, “downgrades” since the reading for Q1 wasn’t the only one. There were some upgrades as well, though.

Getting back on topic, the dismal GDP report caused the Greenback to slide lower again, thanks to further deterioration in rate hike expectations.

Make sure to keep this in mind when trading the Greenback next week, okay? It also makes you wonder how next week’s NFP report will affect the dollar, huh?

NZD

NZD/USD: 1-Hour Forex Chart

NZD/USD: 1-Hour Forex Chart

NZD Pairs Ranked (July 25-29, 2016)

NZD Pairs Ranked (July 25-29, 2016)

Wow! The Kiwi has been one of the top movers for several weeks now, either as one of the top dogs or one of the major losers. Short-term traders must be having a blast trading Kiwi pairs, huh?

For this week, the Kiwi was one of the top dogs, coming in second only to the triumphant yen. As for catalysts, there wasn’t one. Well, not a direct catalysts anyway. And you can see that on how mixed that overlay of four Kiwi pairs look like. It become even more mixed if you also include the other Kiwi pairs.

Equities were mixed for the week, with Asian and U.S. equity indices either flat or in the red, while most of the major European equity indices were well in the green, so risk sentiment was mixed, and is therefore eliminated as a driver.

There was a noticeable surge in Kiwi demand on Tuesday and later on Friday, however. But the weird thing is that there wasn’t really any direct bullish catalyst for the Kiwi at the time.

The Tuesday surge, which also gave the Aussie a nice boost, has left almost everybody (including myself) stumped. Some tried to pin it on New Zealand’s trade data, but I don’t agree with that since the surge occurred several hours after the trade data came out, and New Zealand’s trade surplus shrank anyway. Others were honest enough to admit that they were stumped. Others still simply said that “algos did it.”

The Friday surge, meanwhile, occurred when the U.S. released its dismal GDP report, so it seems like the Kiwi was benefiting from Uncle Sam’s misery. The most likely explanation for this type of price action is the search for higher yield with minimal risk.

And If you can still remember Forex Gump’s Review of the RBNZ’s Annual Statement of Intent, he quoted New Zealand’s Finance Minister Bill English as saying in an interview that New Zealand is “in a very small group of countries – the others being Iceland, South Korea and Australia – that have got a combination of reasonable government finances, a reasonable growth path, and room for interest rates to move.”

But English also added that “Relative yield in New Zealand just remains better, and that’s held up longer and stronger than people might have expected,” so New Zealand and the Kiwi therefore fits the bill.

The Other Currencies

Here is how the other currencies fared this week:

CHF

CHF Pairs Ranked (July 25-29, 2016)

CHF Pairs Ranked (July 25-29, 2016)

The Swissy ended up being the third strongest currency of the week, but the bulk of its gains were actually due to the relentless bullish move (from the Swissy’s perspective) that started on Thursday and persisted on most Swissy pairs until Friday.

USD/CHF: 1-Hour Forex Chart

USD/CHF: 1-Hour Forex Chart

As to what the catalyst for that was, some market analysts are saying that it was due to Credit Suisse, Switzerland’s second-biggest bank, unexpectedly reporting a profit and beating expectations that it was gonna report a loss, thereby boosting confidence in the Swiss economy. That seems like a reasonable thesis, especially since the Swissy got another boost when UBS, the biggest bank in Switzerland, also reported better-than-expected profit levels on Friday.

AUD

AUD Pairs Ranked (July 25-29, 2016)

AUD Pairs Ranked (July 25-29, 2016)

The Aussie’s price action was similar to the Kiwi’s, so the search for high yet relatively safe yield was likely driving demand for the Aussie as well. The Aussie’s price action was a bit more subdued, however, likely because most forex traders don’t want to be too exposed ahead of next week’s RBA decision.

AUD/USD vs. NZD/USD: 1-Hour Forex Chart

AUD/USD vs. NZD/USD: 1-Hour Forex Chart

Speaking of the RBA decision, Australia released its CPI report during the week and while it was within the expected +0.4% consensus, it seems to have weighed on the Aussie rather than boost it. This is most obvious when looking at AUD/NZD’s chart.

AUD/NZD: 1-Hour Forex Chart

AUD/NZD: 1-Hour Forex Chart

As to why that is, some market analysts are saying that a possible rate cut is still in play next week, so do keep an eye on the Aussie next week since chances are good that it will be a top loser or winner next week.

EUR

EUR Pairs Ranked (July 25-29, 2016)

EUR Pairs Ranked (July 25-29, 2016)

Nothing really worth saying about the euro since price action among euro pairs was really mixed, with the euro’s overall performance also mixed.

GBP

GBP Pairs Ranked (July 25-29, 2016)

GBP Pairs Ranked (July 25-29, 2016)

Like the euro, the pound’s price action was rather chaotic so it was likely being driven by opposing currency price action. But the pound was one of the weakest currencies of the week, and that was likely because of lingering disappointment over last week’s special edition Markit’s PMI report. Although given that the BOE MPC statement is next week, I’m pretty sure some forex traders were probably opening preemptive positions just in case the BOE does decide to cut.

CAD

CAD Pairs Ranked (July 25-29, 2016)

CAD Pairs Ranked (July 25-29, 2016)

Is oil down? Yes, very hard, so now you know why the Loonie was the second-weakest currency of the week.

  • U.S. crude oil down (CLG6) by 6.28% to $41.45 per barrel for the week
  • Brent crude oil down (LCOH6) by 5.19% to $43.36 per barrel for the week

As for the slide in oil prices, market analysts are pointing to the usual, namely oversupply jitters due to weak demand and the fifth consecutive week of increase in U.S. oil rigs.

Okay, here’s this week’s scorecard:

Currency Scores (July 25-29, 2016)

And here’s last week’s poll results:

Currency Poll (July 25-29, 2016)Woah! A lot of you were bullish on the Greenback. I sure hope you were able to abandon ship quickly when the FOMC statement began to sink the Greenback. As for the 14.44% of you who were bullish on the yen, as well as the 9.09% of you who were bullish on the Kiwi, you’re probably really pleased with yourselves right about now. As usual, just make sure to lock-in profits or move stops, though.

Now that you know what the likely main drivers were this week, and having taken a look at the forex calendar for next week, which currency do you think will come out on top next week? Vote in the poll below!

 

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