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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 Market Movers of the Week (May 29-June 2, 2017)

Half of the top 10 movers are Loonie pairs, with the Loonie out in all of ‘em. It’s therefore clear that Loonie-bashing was one of the main themes this week. And the currency that dished out the most pain happened to be the Swissy. Hah! Take that, Thomas Jordan!

However, it should also be noted that the Swissy’s domination didn’t become clear until the end of the week since the Kiwi and the euro (and even the pound) were giving  the Swissy a hard time.

The Canadian Dollar

Overlay of CAD Pairs & WTI Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & WTI Oil (Black Line): 1-Hour Forex Chart

After two straight weeks of wonky price action and apparent reluctance to track oil prices, Loonie pairs began to track oil prices again (for the most part). And since oil got sold off during the week, the Loonie ended up getting sold off as well to end close out the week as the worst-performing currency of them all. Heck, half of the top 10 movers are Loonie pairs, as mentioned earlier.

  • U.S. WTI crude oil down (CLG6) by 4.06% to $47.78 per barrel for the week
  • Brent crude oil down (LCOH6) by 4.07% to $50.03 per barrel for the week

As to why oil took a plunge this week, that was blamed by market analysts on Libya’s higher oil output, which boosted OPEC’s overall oil output for the first time this year, as well as concern over rising U.S. oil output, since U.S. oil rigs continue to increase and Trump’s withdrawal from the Paris climate deal is viewed as a tacit sign that U.S. oil rigs (and oil production) will continue to rise.

All the above factors apparently eroded the market’s belief that OPEC’s oil cut deal extension would be able to restore balance to the oil market.

Aside from getting dragged down by plunging oil prices, Loonie pairs also likely got hit by Canada’s poor trade report on Friday since most Loonie pairs steadied ahead of Canada’s trade report while oil continued to slide.

And when Canada’s trade report was released, the Loonie weakened broadly (except on USD/CAD) even as oil recovered a bit, which implies that Canada’s trade data was the culprit.

As for specifics, exports in March were revised lower while imports got revised higher. As a result, the reading for March got downgraded from a slight deficit of $0.1 billion to $0.9 billion.

For the month of April, meanwhile, the consensus was that the Canadian economy would be able to erase the deficit. As it turns out, however, exports actually increased by 1.8% to a record high of $47.69 billion, thanks to the 4.4% in exports of vehicles and parts, but imports increased by 0.06% to $48.06 billion. As such, Canada wasn’t able to erase its trade deficit, printing a narrower deficit of $0.04 billion instead.

Interestingly enough, Canada’s Q1 GDP report was released on Wednesday. And it was rather good (at least on the surface) but the Loonie barely reacted and even continued to track oil prices lower.

Quarter-on-quarter, Canada’s GDP grew by 0.9% in Q1, which is faster than Q4 2016’s +0.7%, as well as the second fastest quarterly growth in 11 quarters.

Year-on-year, Canada’s GDP grew by 2.3%, which is the fastest annual rate of expansion in 10 quarters and marks the third consecutive quarter of faster annual growth to boot.

As for the details, they’re a bit more mixed since consumer spending increased and business investment rebounded, but net trade was a drag because of a slight fall in exports and a large increase in imports.

Anyhow, the lack of interest on the GDP report was likely because of the fact that the BOC already explicitly said during the most recent BOC statement  that there will be “very strong growth in the first quarter” while also warning that the strong growth in Q1 “will be followed by some moderation in the second quarter.” And it just so happens that Canada’s disappointing trade report is a sign that the BOC may be right on its forecast for softer growth in Q2.

The Swiss Franc

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

The Swissy was the one currency to rule them all this week. But as mentioned earlier, the Swissy’s path to domination was rough because the Kiwi and the euro gave the Swissy a hard time.

We’ll discuss the euro and the Kiwi later, but just know that the euro had a good run this week. And as usual, the Swissy and euro were performing an almost synchronized dance, as you can see below.

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

And if you’re a newbie or a veteran who needs a refresher, you can check out Forex Gump’s write-up here if you wanna know why the euro and the Swissy have been dancing in tandem..

Anyhow, looking at EUR/CHF below, we can see that EUR/CHF was trading roughly sideways but the Swissy managed to clearly win out against the euro come Friday, thanks to the NFP report.

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

We’ll talk more about the NFP report later when we discuss the Greenback. But let me just note that despite U.S. equities capturing modest gains in the aftermath of the NFP report, U.S. bond yields actually plunged hard. This implies that there was some risk aversion, especially since European bond yields also got dragged lower by the high demand for bonds in the wake of the NFP report.

And these signs of risk aversion likely spurred demand for the safe-haven Swissy, allowing it to finally overpower the euro after having been in a stalemate for most of the week.

As to how the Swissy eked out a win against the Kiwi, that’s thanks to the strong demand for the Swissy on Wednesday.

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

What happened on Wednesday, you ask? Interestingly enough, not much in terms of relevant events or data for the Swissy. In fact, SNB Boss-man Thomas Jordan was railing at the “significantly overvalued” Swissy on that day, but traders didn’t seem to really mind him.

Jordan even threatened that the SNB is ready and willing to expand its balance sheet, which is a way of saying that it’s ready to buy foreign currency “investments” in order to try and weaken the Swiss franc. Even so, traders weren’t really that worried and kept buying up the Swissy.

Aside from tracking the euro, which was also in rally mode on that day, there’s really not much else that could have driven demand for the Swissy on Wednesday since risk-taking actually prevailed at the time, although risk aversion did slowly begin to creep in by the time the U.S. session rolled around.

However, I did note in Wednesday’s London session recap that Wednesday was the last day of May, so some wonky price action was to be expected due to month-end flows as hedge funds, mutual funds, pension funds, and other large players rebalance their portfolios and/or prepare to make cash distributions.

Anyhow, whatever was really driving demand for the Swissy on that day, it was enough to give the Swissy the edge it needed to score a win against the Kiwi.

The New Zealand Dollar

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

I mentioned last week that the Kiwi’s strength was sustained last Friday, which is a bit wonky because risk aversion prevailed and commodities were in retreat at the time. And this week, that wonky price action continued. And I really do mean wonky.

For example, the Kiwi staged a broad-based rally on Tuesday, as marked on the chart above. Only problem is that commodities were taking hits and equities were in retreat at the time, as noted in Tuesday’s London session recap.

In fact, commodities got a good ole fashioned beat-down during the course of the week, and yet the Kiwi prevailed.

Bloomberg's Commodity Index
Bloomberg’s Commodity Index

One probable reason as to why the Kiwi just shrugged off the commodities rout is last week’s Fonterra’s report After all, Fonterra upgraded this season’s farmgate milk prices by 15 cents to $6.15 per kilo while giving a forecast of $6.50  for the next season’s milk prices, which implies that Fonterra thinks that the dairy market will continue to improve, or that dairy prices will continue to firm at least. And remember, dairy products are New Zealand’s main commodity export.

As for the Kiwi’s overall strength this week, it’s highly probable that traders were extending last week’s theme of Kiwi strength, given the other positive events and economic reports for the Kiwi, namely New Zealand’s upbeat trade report and New Zealand’s annual budget.

Demand for the Kiwi was rather strong, so much so that the disappointing PMI reading from Caixin/Markito only applied enough bearish pressure to steady the Kiwi’s price action for a while, only for pound bulls to charge in later.

The Australian Dollar

Overlay of AUD Pairs & Iron Ore (Black Line): 1-Hour Forex Chart
Overlay of AUD Pairs & Iron Ore (Black Line): 1-Hour Forex Chart

The Aussie was the polar opposite of the Kiwi since the Aussie was the second worst-performing currency of the week.

And as you probably saw in the chart above, one of the major sources for the Aussie’s suffering this week was the huge drop in iron ore prices on Wednesday, which market analysts blamed on fears of a glut amid growing iron ore inventory levels in China, as well as the slide in Chinese steel prices on expectations that construction activity in China will slow.

The other source of suffering for the Aussie was the Chinese manufacturing PMI reading from Caixin/Markit since it came in at 49.8, missing expectations for a soft tumble from 50.3 to 50.2, as well as marking the first reading below the 50.0 stagnation level in 11 months. Also, the reading contradicts the upbeat official reading from the Chinese National Bureau of Statistics.

In fact, the poor PMI reading even negated the net positive data Australian data, namely retail trade turnover rebounding by 1.0% in April (-0.2% previous) and private capital expenditure increasing by 0.3% in Q1 (-1.0% previous).

Moreover, iron ore actually bottomed out on Thursday, but disappointment over the PMI report apparently kept up the bearish pressure on the Aussie, so the Aussie ended up extending its losses instead of staging a broad-based recovery.

Fortunately for the Aussie, Aussie bears finally ran out of steam come Friday. And since iron ore continued to recover on that day, many Aussie pairs also got some respite, albeit not enough for the Aussie to get a better ranking.

The Euro

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

The euro is the third best-performing currency this week, although price action on the euro was rather chaotic. There’s actually some order in that chaos, though, since the euro broadly advanced against its peers on Tuesday and Wednesday. And the gains captured on those days allowed the euro to close out the trading week as a net winner.

So, what happened on Tuesday and Wednesday? Well, as noted in Tuesday’s London session recap, Greek Finance Minister Euclid Tsakalotos shot down rumors about Greece supposedly planning to opt out of receiving more bailout money by saying the following:

Bild has distorted what I said yesterday. I never said that Greece would not repay debt in July. There is no such issue.”

“What I did say is that the disbursement (of bailout money) was not an issue, because all sides agreed that we have kept to our commitments.”

“But the Greek government feels that a disbursement without clarity on debt is not enough to turn the Greek economy around.”

I also noted in my recap that there was a Reuters report making the rounds at the time, which cited four unnamed ECB sources as claiming that ECB officials are supposedly “set to take a more benign view of the economy when they meet on June 8 and will even discuss dropping some of their pledges to ramp up stimulus if needed.”

As for what happened on Wednesday, not much really, although the Euro Zone get a mixed set of economic reports. But as I pointed out in Wednesday’s London session recap, market analysts were still attributing the euro’s strength to the Reuters report that I mentioned earlier.

After that, the euro’s price action steadied a bit while still showing mostly strength before becoming a mixed mess when the NFP report was released on Friday.

The U.S. Dollar

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

The Greenback had a mixed performance from Monday to Wednesday, with some Greenback pairs trading roughly sideways.

Roughly uniform price action finally began to show on Thursday, probably because of preemptive buying on the expectation that the leading labor indicators would point to an upbeat NFP report.

As it turns out, the ADP report for the month of May did print a better-than-expected figure for private non-farm payrolls (+253K vs. 181K expected, 174K previous). ISM’s manufacturing PMI also improved further instead of deteriorating as expected. As such, the Greenback jumped higher and then extended its gains before becoming more mixed again when Friday’s Asian session rolled around.

Unfortunately, the leading indicators were  a miss since non-farm employment grew at a slower-than-expected pace in May. And as Forex Gump pointed out in his review of the May NFP report, which you can read here, the details were also rather disappointing.

But as Forex Gump also pointed out, odds for a June rate hike remained high. And while the NFP report initially caused odds for two more hikes by the end of the year to waver, odds steadily recovered and were little changed for the day when the week ended.

I therefore agree with Forex Gump’s conclusion that the wider U.S. trade deficit in April (-$47.62B vs. -$45.28B previous) was likely applying extra selling pressure on the Greenback as well, exacerbating its losses.

I would only add that those who took preemptive positions ahead of the NFP report were likely taking profits off the table as well, applying even more bearish pressure on the dollar.

And because of this intense and broad-based Greenback selloff on Friday, the Greenback ended up as the third worst-performing currency of the week this week.

The Pound Sterling

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

The pound was a net loser this week. But interestingly enough, the pound was actually a net winner for most of the week until Friday came around. Also, the pound’s intraday price action was basically the pound’s knee-jerk reaction to every new poll that got released. As such, the pound usually got kicked lower when polls showed that the Conservative Party’s lead narrowed. And conversely, the pound usually found support when polls showed that the Conservative Party’s lead widened again.

This is made abundantly clear on Wednesday when the pound found support across the board and began climbing higher when the two polls results below got released since they gave the Conservative Party a double digit lead again.

The pound then began dipping when the Conservative Party’s lead got whittled down to the single digits again.

But strangely enough, it was the U.S. NFP report that was the coup de grace that ended the pound’s domination and ensured that it would have a mixed performance this week.

No clear reason for this wonky reaction, but it very likely has more to do with opposing currency price action, which amplified pound selling on some pound pairs. After all, the pound was already dipping ahead of the NFP report because of disappointing poll results, as mentioned earlier.

Also, do note that there was a poll released earlier. It was conducted by Survation for The Mail, and it’s the worst poll so far since it gave Theresa May’s Conservative Party a measly lead of one point against Labour. There’s therefore a chance that the pound may have some gaps come Monday.

Also note that there was apparently another terrorist attack in the U.K., which may (or may not) help cause the pound to gap against its peers on Monday.

The Japanese Yen

Overlay of JPY Pairs & US10Y Yield (Black Line): 1-Hour Forex Chart
Overlay of JPY Pairs & US10Y Yield (Black Line): 1-Hour Forex Chart

The yen had another mixed performance this week. But looking at the chart above, we can see that yen pairs were still roughly tracking bond yields for the most part, U.S. bond yields in particular.

U.S. markets were closed in observance of Memorial Day on Monday, so yen pairs behaved themselves on that day.

Bond yields plunged come Tuesday, though, and that was blamed by market analysts on month-end buying of bonds.

Instead of gaining strength across the board, however, yen pairs ended up mixed, probably because of renewed jitters over North Korea, given that North Korea successfully tested a rocket and made strange threats against the U.S. on that day.

For its part, the U.S. proudly announced that they successfully tested a missile defense system meant to intercept incoming nuclear and ballistic missiles.

This sabre rattling between the two countries likely made yen bulls wary of buying up the yen too much since the yen’s mixed performance persisted on Wednesday, even though bond yields continued to slide.

Some semblance of normality finally returned on Thursday, though, since yen pairs tracked bond yields higher on Thursday

And when the NFP report caused bond yields to plunge on Friday, the yen got a nice boost as well, although it did have a much harder time taking ground from the Kiwi. Also, the yen initially pushed back against the Swissy when the NFP report got released, but ended up giving back its gains to the Swissy later on.

Anyhow, the yen’s mixed performance on Tuesday and Wednesday (despite falling bond yields) is the reason why the yen’s overall performance for the week was mixed as well.

Okay, here’s this week’s scorecard: