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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 Market Movers of the Week (May 15-19, 2017)

Greenback weakness is already a given. But did you know that the Swissy was this week’s best-performing currency. Just look at that table, yo! Half of the top 10 movers are Swissy pairs. The euro was following closely, though. So, what drove price action on these currencies? And how did the other currencies fare this week? Let’s find out, shall we?

The U.S. Dollar

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

USD Pairs Ranked

Everybody probably already knows that the U.S. dollar got a major smack-down this week. And I’m sure almost everybody already knows why, so I’m not gonna dwell too much on the Greenback.

But to give y’all some context, the Trump-Russia Conspiracy was pushed into the background (for some reason) when the mainstream media began fawning over Trump (for some reason) after U.S. and Russian relations deteriorated terribly in the aftermath of The Donald’s missile strike on a Syrian air base in order to avenge the beautiful babies allegedly gassed by Assad.

Signs that the Trump-Russia Conspiracy may get pushed to the front again began to show up over the weekend after Trump fired Comey last week and after Trump said in an NBC News interview that he was planning to fire Comey regardless of the recommendation from Jeff Sessions and Rosenstein.

Moreover, the mainstream media interpreted the following statement from the NBC interview as Trump’s main motive for firing Comey.

“Regardless of recommendation, I was gonna fire Comey knowing there was no good time to do it. And in fact, when I just decided to just do it, I said to myself [that], you know, this Russia thing between Trump and Russia is a made-up story – it’s an excuse by the Democrats for having lost an election.”

And this week, the mainstream media finally resurrected the Trump-Russia Conspiracy and pumped it full of steroids by launching a media blitz against The Donald, or a “witch hunt” as Trump prefers to call it.

The opening salvo against The Donald arguably came from The Washington Post when it released an article citing unnamed “U.S. officials” that Trump supposedly shared highly classified information to the Russian delegation that visited the Oval Office last week.

Moreover, a memo was later leaked to the press claiming that Trump asked Comey to end the FBI’s investigation on Flynn, Trump’s former national security adviser. This was supposedly before Trump decided to fire Comey.

Things only got worse on Tuesday when Trump tweeted the following after his staff tried their best to refute the Washington Post article.

Given all that political drama, fears began to spread that Trump may potentially get impeached, even though the Washington Post admitted somewhere in its article that:

“As president, Trump has broad authority to declassify government secrets, making it unlikely that his disclosures broke the law.”

The political hysteria over Trump reached a fever pitch on Tuesday, which is also the tipping point for the Greenback, as marked in the overlay of Greenback pairs earlier. After all, the revival of the Trump-Russia Conspiracy means that Trump’s growth-oriented policies, including his fiscal stimulus and tax reform plans, will likely get delayed.

Things calmed down a bit on Thursday. And some market analysts pointed to a May 3 video below that was making the rounds, since the video showed Comey testifying under oath before the Senate Judiciary Committee that neither the Attorney General nor any other top officials of the DOJ have ordered the FBI to stop an investigation for political reasons. This was taken to mean that the Trump administration has not interfered with the FBI.

Other market analysts, meanwhile, pointed to Treasury Secretary Mnuchin’s comments on Thursday that he’s “still very hopeful that we’ll get tax reform done this year.”

Whatever caused the Greenback’s slide to pause, it soon lost its magic, since the Greenback’s slide resumed on Friday. There were no new major Trump-related developments, but market analysts continued to blame the Greenback’s weakness on Trump-related political uncertainty.

And as a side note, some market analysts also claim that rate hike expectations took a hit this week. However, the CME Group’s FedWatch Tool shows that odds for a June rate hike actually improved from 69.2% last week to 78.5% this week, despite the political turmoil and mixed data this week.

June Rate Hike Odds (As of May 20, 2017)
June Rate Hike Odds (As of May 20, 2017)

The Euro

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

EUR Pairs Ranked

The euro is the second best-performing currency of the week after the Swissy, but I’ll be discussing the euro first, and you’ll see why when we discuss the Swissy later.

Anyhow, if you can still recall last week’s recap, I wondered how the euro will fare, given the broad-based bullish boost on the euro last Friday, as well as the fact that large players were now net bullish on the euro, according to the COT report.

Well, the obvious answer is that the euro trounced all its rivals this week (except the Swissy of course). And if we remove EUR/CHF and EUR/JPY, we can see clearly see that the euro started to trend steadily higher during Monday’s London session before becoming more mixed on Thursday and then trending higher again on Friday.

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

Interestingly enough, there were no apparent catalysts for the euro on Monday. Although it’s possible that the victory of Angela Merkel’s Christian Democratic Union in North Rhine-Westphalia over the weekend may have eased political uncertainty in Europe since the region was the stronghold of its chief rival, the Social Democrats. And the euro’s rise on Monday may have been a delayed reaction to the news.

Anyhow, the general consensus among market analysts (myself included) is that profit-taking by euro bulls, who were betting preemptively on a Macron victory, was finally over. As such, focus is shifting back to the Euro Zone’s improving economy as a whole. After all, ECB Overlord Draghi did say in the most recent ECB presser that risks from within the Euro Zone itself are abating, although external risks still do exist.

“The risks surrounding the euro area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors.”

Given the improving conditions in the Euro Zone, as well as expectations that conditions will continue to improve, some market analysts are beginning to think that a move to tighten the ECB’s monetary policy is “imminent”, even though Draghi did communicate in the latest ECB statement that the ECB is in no hurry to tighten because the ECB is not yet confident that the rise in inflation is sustainable.

And while economic reports during the week were mid-tier at best, most of them didn’t act as stumbling blocks for the euro’s upward push at least. The second estimate for the Euro Zone’s Q1 GDP, for example, was unchanged at 0.5% quarter-on-quarter and 1.7% year-on-year. Meanwhile, the final estimate for the Euro Zone’s annual inflation was unchanged at +1.9% in April.

Moving on, the euro became a bit more mixed on Thursday but was mostly weaker, probably because of profit-taking ahead of the ECB minutes and Draghi’s speech, just in case there’s an unwanted surprise.

Fortunately for euro bulls, Draghi’s speech was a dud while the ECB’s meeting minutes didn’t really deviate from what was already discussed during the recent ECB presser, although there were some interesting details.

And one such detail is that the ECB may reassess its outlook this June.

“At the forthcoming policy meeting in June, new staff projections, alongside further data and analyses, would become available, putting the Governing Council in a better position to take stock and reassess the sustainability of the recovery and the outlook for inflation.”

There was also this rather interesting bit, which may be a hint that the ECB could potentially switch to a more hawkish policy bias if certain conditions are met (emphasis mine).

“Looking ahead, it was suggested that, if the euro area recovery kept up its momentum and progress was made in attaining a sustained adjustment in the path of inflation, due consideration would need to be given to adjusting the present formulation of the Governing Council’s forward guidance.”

And this somewhat hawkish tilt to the minutes, as well as the lack of major negative catalysts, very likely helped to push the euro higher again come Friday.

The Swiss Franc

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

CHF Pairs Ranked

And so we come to the this week’s champ – the mighty Swissy. The Swissy’s domination is even more awesome when you consider that the Swissy was the worst-performing currency last week.

And the reason why I opted to discuss the euro first is that the Swissy appeared to be partly tracking the euro higher this week. This is not really a new development, though, since I already pointed out that the Swissy appears to be behaving like its old self in my recap for the April 24-28 trading week.

As to why the Swissy originally tracked the euro (before the SNB began meddling in the forex market), improving economic conditions and easing political jitters in the Euro Zone is also good for Switzerland. After all, Switzerland imports mainly to the Euro Zone (Germany and France primarily). Also, a stronger euro because of improving economic conditions (and speculation of future tightening) means that the pesky SNB doesn’t need to manipulate, er, I mean intervene in the forex market as much.

And if we strip CHF/JPY and EUR/CHF, we can see that this synchronized dance between the Swissy and the euro can clearly be seen on Monday and part of Tuesday when the Swissy rose higher without any apparent catalysts and despite mixed risk sentiment.

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

As to how and why the Swissy ultimately won out in the end, all you need to do is take a look at EUR/CHF.

EUR/CHF 1-Hour Forex Chart
EUR/CHF 1-Hour Forex Chart

As you can see, the euro began to lose out to the Swissy during Tuesday’s U.S. session. What happened then? Well, if you didn’t skip the discussion on the Greenback (shame on you if you did), then you already know that Trump-related drama was brewing, which caused the Greenback to plunge and risk aversion to ramp up.

It therefore looks like the Swissy also acted as a safe-haven currency, which is very likely why the Swissy managed to outperform the euro this week. Also, the Swissy apparently took advantage of the euro’s overall weakness ahead of the ECB’s minutes and Draghi’s speech.

However, the euro did get some revenge on the Swissy when Draghi’s speech turned out to be a dud while the ECB’s meeting minutes appeared to hint at a potentially hawkish ECB. That was not enough to win against the Swissy, though.

Also, SNB Head Thomas Jordan was quoted in a newspaper interview conducted on Wednesday, but published on Thursday, as saying his usual mantra that the Swissy is still overvalued and that the SNB is still ready to intervene. But, well, that didn’t really have any effect. Or maybe it did because the Swissy had a more mixed performance on Friday.


The Other Currencies

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


The Australian Dollar

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

AUD Pairs Ranked

Depending on your data feed, the Aussie was either the second worst-performing currency of the week, or the third worst-performing currency of the week. Regardless, the fact remains that the Aussie was a loser this week.

And if we remove AUD/USD, we get this – a broad-based slide from Tuesday to Thursday.

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

It therefore appears as if risk aversion from all the Trump-related ruckus was the higher-yielding Aussie’s main enemy this week, since commodities actually rallied, although iron ore, Australia’s main commodity export was somewhat flat but dipping slightly into the red this week.

Bloomberg's Commodity Index
Bloomberg’s Commodity Index

However, economic reports also played a role in the Aussie’s weakness, and this can be more clearly seen on AUD/NZD.

AUD/NZD: 1-Hour Forex Chart
AUD/NZD: 1-Hour Forex Chart

As you can see above, AUD/NZD was somewhat flat on Monday and Tuesday. The Aussie then got slapped lower on Wednesday when the Westpac-Melbourne Institute survey of consumer sentiment revealed that the consumer sentiment in Australia fell by 1.1% to 98 index points in May after already falling by 0.7% previously. This is the lowest reading since January of this year. Also, wages in Australia grew by 0.5% quarter-on-quarter in Q1 2017, which is within expectations. However, the reading for Q4 2016 was downgraded from +0.5% to +0.4%. Year-on-year, wages grew by 1.9% in Q1 2017, which is the same pace as in Q4 and Q3 2016. However, it should be noted that the 1.9% increase is the slowest ever on record. Moreover, CPI grew by 2.1% in Q1 2017, which means that wage growth is falling behind.

The Aussie finally found some respite on Thursday, thanks to a better-than-expected jobs report for the April period, with the jobless rate dropping from 5.9% to 5.7% and the Australian economy generating a net increase of 37.4K jobs in April (+4.5K expected).

However, the net increase in jobs was due to the 49.0K increase in part-time jobs, which was partially offset by the 11.6K decrease in full-time jobs. And that, or the slide in iron ore prices at the time (or both), later weighed down on the Aussie.

After that, the Aussie’s price action became mixed on Friday, so opposing currencies likely dominated Aussie pairs.

The New Zealand Dollar

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

NZD Pairs Ranked

The Kiwi had another bad run this week. And like the Aussie, it looks like the risk-off vibes during the week was the higher-yielding Kiwi’s main adversary this week. This becomes more clear when we take out NZD/USD from the overlay of Kiwi pairs.

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

Interestingly enough, the Kiwi started showing broad-based weakness during Tuesday’s Asian session, and this can even be seen on AUD/NZD. However, there wasn’t really any catalyst for the Kiwi during Tuesday’s Asian session and risk sentiment in the Asia-Pacific region was mixed at the time, as noted in Tuesday’s Asian session recap. I did point out, though, that both the Aussie and the Kiwi began to show signs of weakness when base metals began to retreat. But as I also noted, iron ore was not one of them. And that may have given the Aussie the upper hand against the Kiwi.

The Japanese Yen

Overlay of JPY Pairs & US10Y Yields: 1-Hour Forex Chart
Overlay of JPY Pairs & US10Y Yields: 1-Hour Forex Chart

JPY Pairs Ranked

After showing signs of decoupling from bond yields during the past few weeks, yen pairs finally began to march in-step with bond yields yet again, as can be seen above. Heck, even the Swissy and the euro, the top dogs of the week, showed signs of being dragged along by the yen’s renewed connection to bond yields. Just look at the price action on EUR/JPY and CHF/JPY and compare them with bond yields and how other yen pairs moved.

As to why the yen and bond yields found love again, and why they began showing signs of divergence in the first place, Forex Gump has some thoughts on that, so read it here, if you’re interested (hint: it’s about North Korea).

Anyhow, I don’t think I have to explain why bond yields plunged hard this week, right? After all, it’s already clear that one of the major themes that drove price action this week was political uncertainty due to all the drama from Washington.

As to why bond yields later rose on Thursday and Friday, that was attributed by market analysts to the recovery in the equities market, which lowered safe-haven demand for bonds.

The Canadian Dollar

Overlay of CAD Pairs & Oil: 1-Hour Forex Chart
Overlay of CAD Pairs & Oil: 1-Hour Forex Chart

CAD Pairs Ranked

The Loonie had a mixed performance this week. And looking at that there overlay of Loonie charts, it looks like the Loonie’s price action was as mixed as its performance. As such, opposing currencies very likely dominated price action on Loonie pairs.

Interestingly enough, oil benchmarks were in rally mood this week, thanks mainly to expectations that OPEC members and Russia would be able to hammer out an agreement to extend the oil cut deal, market analysts say.

  • U.S. crude oil up (CLG6) by 5.52% to $50.48 per barrel for the week
  • Brent crude oil up (LCOH6) by 5.76% to $53.77 per barrel for the week

However, the Loonie failed to follow suit, and there’s no clear reason why. Well, Loonie pairs did try to track oil prices. Just look at how price action on Loonie pairs and oil went down on Thursday. Even so, it’s not clear why Loonie bulls were wary of loading up on the Loonie and sending it the moon.

Maybe forex traders are wary of getting too exposed on the Loonie because of Canada’s housing market problems? Although it’s also possible that forex traders were jittery ahead of the BOC statement next week.

The Pound Sterling

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

GBP Pairs Ranked

The pound also had a mixed performance this week. And very, very interestingly enough, there were a slew of positive economic reports for the U.K. this week. And while the reports did send the pound higher as an initial reaction, sellers were clearly lurking to kick the pound back down again, even for really good reports like the April retail sales report, which revealed that retail sales volume surged by 2.3%, a bigger increase than the +1.1% consensus and is a major rebound after the 1.4% contraction in March. Also, the increase was broad-based to boot.

And these pound bears hidden in the bushes, as well as opposing currency price action, resulted in a mixed week for the pound.

Maybe pound bears haven’t had enough of a feast after last week’s BOE statement and are selling into any pound rallies? That seems to be the case during this week at least. After all the BOE did admit that its projections hinge on “the assumption that the adjustment to the United Kingdom’s new relationship with the European Union is smooth.” And BOE Guv’nah Carney admitted during the presser that the BOE didn’t have any contingency plans for a “disorderly negotiating process.”

Okay, here’s this week’s scorecard:

Scores

By the way, I’m using a different charting software to generate the overlays, so do vote in the poll below on which charting style you prefer (if you noticed any difference in the first place).