Top Forex Market Movers of the Week (Oct. 31 – Nov. 4, 2016)

The forex trading week has come and gone. Time to take a look at what was driving forex price action. Were you able to profit from any of this week’s top movers?

Top Forex Weekly Movers (Oct. 31 - Nov. 4, 2016)

Top Forex Weekly Movers (Oct. 31 – Nov. 4, 2016)

There were lots of themes in play this week, with Loonie and Greenback weakness, as well as pound strength being the main ones. So, what was driving forex price action on these and the other currencies this week?

CAD

USD/CAD: 1-Hour Forex Chart

USD/CAD: 1-Hour Forex Chart

CAD Pairs Ranked (Oct. 31 - Nov. 4, 2016)

CAD Pairs Ranked (Oct. 31 – Nov. 4, 2016)

The poor Loonie got the stuffing beaten out of it, ending up as this week’s worst-performing currency. And based on how the Loonie’s price action went down, it looks like we can blame the Loonie’s ill fortune on the very painful slump in oil prices. By the way, do note that oil’s price action (black line chart) on the overlayed chart above is inverted, so don’t get weirded out, okay?

  • U.S. crude oil up (CLG6) by 9.43% to $44.11 per barrel for the week
  • Brent crude oil up (LCOH6) by 8.35% to $45.56 per barrel for the week

The large drop printed by the two oil benchmarks above are the largest since January of this year. Furthermore, this marks the second of week of floundering oil prices.

Oil’s misfortune (and the Loonie’s as well) started on Monday and almost never abated. And according to most market analysts, the slump in oil prices was due to doubt over OPEC’s planned production cut, which is set to be finalized by November 30, as well as an expected build-up in U.S. oil inventories. Incidentally, the latter became a reality on Wednesday when the U.S. Energy Information Administration (EIA) reported a massive 14.4 million narrel build-up in U.S. oil inventories. This is a whole lot more than the expected increase of 1.6 million barrels.

USD

USD/JPY: 1-Hour Forex Chart

USD/JPY: 1-Hour Forex Chart

USD Pairs Ranked (Oct. 31 - Nov. 4, 2016)

USD Pairs Ranked (Oct. 31 – Nov. 4, 2016)

The Greenback also got its butt kicked this week, but managed to edge out a win against the poor Loonie. And market analysts were pretty uniform in pinning the blame for the Greenback’s weakness on U.S. election jitters, which started last week, as I pointed out in the previous Top Forex Market Movers of the Week.

To be more specific but without delving too deeply into the politics, Wikileaks released a string of emails that revealed some rather shady, eyebrow-raising stuff related to the Clinton Campaign and an FBI investigation into Anthony Weiner, estranged husband to Huma Abedin (Hillary’s top aide), has yielded new emails that may be linked to Hillary Clinton, which resulted in the reopening of the FBI’s investigation into the Clinton email, umm, controversy.

The above events hurt Clinton’s poll numbers, allowing Trump to close the gap. And market players were left to face the reality that a Trump presidency is now a very real possibility in next week’s elections.

Not even the somewhat hawkish FOMC statement nor the net positive NFP report could give the Greenback a lift, although the Greenback’s broad-based slide seems to have stalled due to the two top-tier catalysts. Anyhow, Forex Gump has a write-up on the FOMC statement here, if you’re interested. Forex Gump also has reviewed the October NFP report, which you can read here.

GBP

GBP/USD: 1-Hour Forex Chart

GBP/USD: 1-Hour Forex Chart

GBP Pairs Ranked (Oct. 31 - Nov. 4, 2016)

GBP Pairs Ranked (Oct. 31 – Nov. 4, 2016)

There were lots of catalysts for the pound this week, and they mostly propelled the pound higher, allowing the pound to end up as the one currency to rule them all.

The pound got some demand early on, thanks to Mark Carney’s formal announcement that he would continue to serve as the BOE’s Guv’nah until June 2019. The pound then wobbled a bit and had a mixed performance on Tuesday when the U.K.’s manufacturing PMI failed to meet expectations (54.3 vs. 54.5 expected, 55.5 previous).

Luckily for pound bulls, the U.K.’s construction PMI was released on  Wednesday, and it came in at 52.6 (51.8 expected, 52.3 previous), which is the highest reading since March of this year. The U.K.’s services PMI also managed to impress on Thursday since it jumped from 52.6 to 54.5 instead of dipping to 52.5 expected. However, it wasn’t until the U.K. High Court ruled on Theresa May’s authority to trigger Article 50 of the TEU that forex traders started to really load up on the pound.

For those who don’t know, British PM Theresa May plans to trigger Article 50 of the TEU by March 2017. And invoking Article 50 of the TEU is the first step for an actual Brexit. Unfortunately for Theresa May’s government, the High Court ruled as follows:

“For the reasons we have set out, we hold that the Secretary of State does not have power under the Crown’s prerogative to give notice pursuant to Article 50 of the TEU for the United Kingdom to withdraw from the European Union.”

If you really want to or need to, you can read the full 32-page text of the Court’s ruling here, but if you don’t feel the need to sleep just yet, you can read a 2-page summary here.

Anyhow, the ruling means that Theresa May’s government now requires a vote from Parliament before it can trigger Article 50 of the TEU. And while the ruling created more uncertainty, market players were more focused on the fact that the ruling has effectively delayed the inevitable actual Brexit. Market players also cheered the possibility of a softer Brexit, now that Members of Parliament can have their say.

Moving on, the pound got another round of buyers shortly after the High Court’s ruling, thanks to the BOE statement. Forex Gump already has a write-up for it (read it here), and I have already listed down some of the more important points in Thursday’s morning London session recap (read it here).

However, the most important statement that y’all need to know about is this:

Monetary policy could respond, in either direction, to changes to the economic outlook as they unfolded to ensure a sustainable return of inflation to the 2% target.”

This is a very noticeable shift in monetary policy bias from the previous BOE Statement, when “a majority of members expected to support a further cut in Bank Rate.”

The Other Currencies

Okay, here’s how the other currencies fared this week:

NZD

NZD/USD: 1-Hour Forex Chart

NZD/USD: 1-Hour Forex Chart

NZD Pairs Ranked (Oct. 31 - Nov. 4, 2016)

NZD Pairs Ranked (Oct. 31 – Nov. 4, 2016)

Risk aversion was the dominant sentiment this week, with most of the major global equity indices in the red, thanks to the slump in oil prices and jitters over next week’s U.S. presidential elections, according to market analysts.

  • Nikkei 225 (N225) closed 3.10% lower to 16,905.36 for the week
  • Hang Seng (HSI) closed 1.36% lower to 22,642.62 for the week
  • The Euro Stoxx 50 (STOXX50E) closed 3.98% lower to 2,956.56 for the week
  • The FTSE 100 (FTSE) closed 4.33% lower to 6,693.26 for the week
  • The DAX (GDAXI) closed 4.09% lower to 10,259.13 for the week
  • The DOW (DJI) closed 1.50% lower to 17,888.28 for the week
  • S&P 500 (SPX) closed 1.94% lower to 2,075.18 for the week

So how on earth did the higher-yielding Kiwi manage to end up as the second-strongest currency after the pound? What sorcery is this? The risk-off vibes should have sent the Kiwi reeling, or at least dampen demand for it, right?

Well, we can apparently thank New Zealand’s jobs report for that. As Forex Gump noted in one of his write-ups, “New Zealand releases its jobs data on a quarterly basis, so it tends to have some heft to it.” As for specifics, employment increased by 1.4% quarter-on-quarter during Q3, soundly beating expectations of a softer 0.6% increase. The increase in employment was apparently enough to push the jobless rate lower to 4.9%, which is the best reading since Q4 2008. Even better, the lower jobless rate came about even though the labor force participation rate jumped from 69.7% to an all-time high of 70.1%.

Moving on, the GDT index also surged by 11.4% during the latest auction, which is good for New Zealand’s dairy-powered economy, but it wasn’t until the jobs report came out that the Kiwi noticeably began getting buyers across the board, as you probably saw in the chart above.

Oh, the Greenback will likely be in focus next week, due to the U.S. presidential elections, but do note that the RBNZ statement is also coming up next week, so make sure to keep an eye on the Kiwi.

CHF

USD/CHF: 1-Hour Forex Chart

USD/CHF: 1-Hour Forex Chart

CHF Pairs Ranked (Oct. 31 - Nov. 4, 2016)

CHF Pairs Ranked (Oct. 31 – Nov. 4, 2016)

The prevalence of risk aversion during the week that I mentioned earlier likely fueled demand for the safe-haven Swissy. Other than that, there wasn’t really anything else, since only low-tier economic reports were released during the week.

Interestingly enough, the bulk of the Swissy’s gains were harvested on Tuesday, which is when risk aversion began to ramp up its invasion of the European markets. The Swissy even just ignored SNB Chairman Thomas Jordan’s statement on the same day about the Swissy being still “significantly overvalued” and that the “two pillars” of the SNB’s monetary policy are negative rates and intervention.

AUD

AUD/USD: 1-Hour Forex Chart

AUD/USD: 1-Hour Forex Chart

AUD Pairs Ranked (Oct. 31 - Nov. 4, 2016)

AUD Pairs Ranked (Oct. 31 – Nov. 4, 2016)

The Aussie looked liked it was about to soar after the RBA announced that it was maintaining its current monetary policy while hinting that it was in no hurry to cut again during Tuesday’s RBA Statement.

However, the Aussie’s wings got clipped just when it was about to fly, thanks to risk aversion returning in force during Tuesday’s morning London session.

JPY

USD/JPY: 1-Hour Forex Chart

USD/JPY: 1-Hour Forex Chart

JPY Pairs Ranked (Oct. 31 - Nov. 4, 2016)

JPY Pairs Ranked (Oct. 31 – Nov. 4, 2016)

One glance at the table above, and you may have concluded that forex traders had little interest in the yen, given the yen’s mixed performance. But as you can see in the chart, the yen actually got some broad-based demand when risk aversion made a comeback a few hours after the BOJ decided to keep its powder dry. It just so happens that catalysts for the pound and the Kiwi got in the yen’s way. And while the yen lost out to the Swissy, CHF/JPY was essentially trading sideways during the week.

EUR

EUR/USD: 1-Hour Forex Chart

EUR/USD: 1-Hour Forex Chart

EUR Pairs Ranked (Oct. 31 - Nov. 4, 2016)

EUR Pairs Ranked (Oct. 31 – Nov. 4, 2016)

Not really much to say for the euro. It had a rather mixed performance during the week and its price action was pretty messy, which implies that it was vulnerable to opposing currency price action.

Okay, here’s this week’s scorecard:

Scores (Oct. 31 - Nov. 4, 2016)

And here’s last week’s poll results:

Last Week's Poll

The pound and the Kiwi, which are this week’s main winners, only each got 2.86% of the votes. And there were only 5,71% of you who voted for the Swissy. The 14.29% who voted for the yen would have done okay, though, assuming you spread your trades out a bit. As for the 22.86% who voted for the Greenback and the 5.71% who voted for the Loonie, I hope you were able to shift sentiment during the course of the week, especially when media outlets began carrying reports about oil and jitters over the U.S. presidential race.

So, now that you know what the likely 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!