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Anti-dollar price action and risk-off flows boosted the franc and, to some extent, the euro last week. Any catalysts that could change the game this time?

Medium-tier data dump (starting July 24)

There’s no denying that euro bulls are eager to get more confirmation that the central bank could be ready to hike rates sooner rather than later, so upcoming data could make or break these expectations.

Since the euro zone is comprised of several different nations, it’s not unusual to get several leading indicators that serve as piecemeal clues on how overall performance might turn out.

This particular week is chock full of these medium-tier releases, which include manufacturing and services industry PMI readings from top economies and flash GDP and consumer spending data from France. Even though these don’t normally spur directional moves, it still helps to keep close tabs on actual results to have an idea how the region is faring.

ECB monetary policy decision and presser (July 26, 11:45 am GMT)

Towards the latter part of the week, euro traders will hear straight from the policymakers’ mouths during the ECB statement and presser. ICYMI, read up on how their earlier announcement turned out.

As usual, no actual policy changes are expected for now, as traders are just keeping their eyes and ears peeled for clearer clues on when the central bank might decide to hike rates.

Note that there have been whispers of how some central bank officials think that markets are underestimating the possibility of a tightening move happening anytime soon, but the minutes of their earlier meeting still highlighted several concerns. Reiterating these cautious points could keep a lid on euro rallies while the slightest switch to a more hawkish tone could be a big boost.

Overall sentiment

These days, it seems that risk sentiment has been the main driver of price action, especially with all that trade war buzz and Trump tantrums going on. Just keep in mind that the euro and the franc tend to take advantage of dollar weakness, particularly when traders aren’t in the mood to take on more risk.

Last Week’s Price Review

The Euro

The euro’s three-week winning streak ended last week. And while the euro is currently mixed for the week, it’s a net winner again at least.

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

As has been the case in the past couple of weeks, the euro’s price action wasn’t really all that uniform this week. In fact, there are even instance when EUR pairs clearly had diverging price action.

In other words, the euro is still vulnerable to opposing currency price action. And it didn’t help that there were no major news or top-tier economic reports for the euro during the week.

Having noted that, most EUR pairs did have a noticeable downward tilt from Tuesday’s London session until Thursday’s Asian session.

It’s not very clear and the euro’s price action wasn’t uniform, but we do get a clearer picture by simply removing EUR/GBP and EUR/NZD from the overlay.

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

See? So, what happened back then? Well, there weren’t really any direct catalysts for the euro. Okay, sure, the Euro Zone’s core HICP reading for the June period was downgraded on Wednesday, but that’s a mid-tier economic report at best and the euro didn’t really react.

Getting back on track, the Greenback was on the rise back then since Fed Chair Powell’s testimonies helped to reinforce rate hike expectations, according to market analysts.

And that put interest rate differentials and monetary policy divergence into play, obviously in favor of the Greenback and at the expense of the euro, which is only natural. After all, last week’s ECB meeting minutes did have a dovish vibe and reinforced the idea that the ECB is not in a hurry to hike rates.

The euro’s price action did become more mixed come Thursday’s London session, though. However, the euro’s vulnerability to its peers was actually a boon since the Aussie, the Kiwi, and the Loonie were in retreat at the time, with the Greenback weakening later during Thursday’s U.S. session.

And as of Friday, the Aussie, the Loonie, and the Greenback stayed weak against the euro. And to that we add the pound’s week-long slide, and we get a net win for the euro.

In short, the euro was vulnerable to opposing currency price action but is a net winner because the euro got lucky.

The Swiss Franc

After two straight weeks of net losses, the Swissy is finally riding high and is even the top-performing currency of the week (as of 1 pm GMT).

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

EUR and CHF pairs actually had similar price action. However, the Swissy had a running start, likely because of the prevalence of risk aversion on Monday. And this early show of strength gave most CHF pairs a large enough buffer to stay above last week’s closing prices (dashed horizontal line).

Moreover, the Swissy also wasn’t as vulnerable to Greenback strength as the euro since the Swissy didn’t weaken as much as the euro when the Greenback was on rally mode.

NZD/CHF (inverted, red) vs.  EUR/NZD (black): 1-Hour Forex Chart
NZD/CHF (inverted, red) vs.  EUR/NZD (black): 1-Hour Forex Chart
CHF/JPY (red) vs.  EUR/JPY (black): 1-Hour Forex Chart
CHF/JPY (red) vs.  EUR/JPY (black): 1-Hour Forex Chart
USD/CHF (inverted, red) vs.  EUR/USD (black): 1-Hour Forex Chart
USD/CHF (inverted, red) vs.  EUR/USD (black): 1-Hour Forex Chart