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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?

Focus was on the Greenback and the pound this week. However, a whopping 6 out of the top 10 movers are Loonie pairs, with the Loonie winning out in each and every one of them. It’s therefore very clear that the Loonie strength was this week’s main theme.

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

As you probably saw in the chart above and as you can see in the bullet points below, oil got another major smack-down this week, thanks (or no thanks) to continuing jitters over the oil glut, market analysts say. And the main catalyst for the decline in oil prices this week was the surprise build-up in U.S. gasoline inventories, as reported by the EIA.

  • U.S. WTI crude oil down (CLG6) by 2.47% to $44.70 per barrel for the week
  • Brent crude oil down (LCOH6) by 1.77% to $47.30 per barrel for the week

Like last week, however, the Loonie defied falling oil prices and showed broad-based strength this week. Heck, the Loonie even ended up as the one currency to rule them all, as mentioned earlier.

And practically all market analysts are pointing to BOC Senior Deputy Governor Carolyn Wilkins’ speech as the main reason for the Loonie’s strong performance this week.

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

In her speech, Wilkens first praised the Canadian economy by saying that the “diversity” of Canada’s industrial structure has made the Canadian economy “more resilient—although not immune—to shocks.”

In fact, “As the oil and gas and related sectors stabilized, the goods sector as a whole started contributing again.”

Moreover, “growth is not being driven by just a few key industries,” given that data compiled by the BOC “show that more than 70 per cent of industries have been expanding—a rate we have not seen since the oil price shock.”

And here’s the clincher that finally sent the Loonie spurting higher across the board:

“As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required.”

And if you can still remember, the BOC likely retained its neutral policy bias during the May BOC statement. The clearly hawkish tone is therefore big news, so It’s no real wonder why demand for the Loonie suddenly picked up.

Interestingly enough BOC Boss-Man Stephen Poloz had a radio interview the following day. And while he did not explicitly affirm or deny what Wilkins said, he did say that “the interest rate cuts we [the BOC] put in place in 2015 have largely done their work.”

Poloz sounded noticeably more cautious, though, since he also warned that “It isn’t time to throw a party” just yet because the pick up in business investment is still slow. That didn’t stop the Loonie from extending its gains, however.

Sadly, the Loonie did get pulled down by the plunge in oil prices on Wednesday, but dip buyers were clearly waiting for a chance to jump in, ensuring that most of the Loonie’s gains were preserved and allowing the Loonie to end up as this week’s champ.

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 had another strong showing this week but failed to take the top spot from the Loonie and had to content itself with second place. However, the Aussie actually had a mixed start and was a net loser by Tuesday, very likely because iron ore resumed its slide.

The Aussie finally had a reversal of fortunes on Wednesday, though, thanks to a double boost from mostly positive Chinese data, as discussed in Wednesday’s  Asian session recap and the rebound in iron ore prices.

And as noted in Wednesday’s London session recap, the rebound in iron ore prices was due to the recovery in Chinese steel prices. And the recovery in Chinese steel prices, in turn, was because of the 1.8% year-on-year increase in Chinese steel output in May, market analysts say.

After that, the Aussie had a mixed performance when poor U.S. data came out and had another mixed reaction when the Fed released its latest press statement.

The Aussie then got pushed higher across the board when Australia’s May jobs report printed an upside surprise for net employment change (42.0K vs. 10.0K expected, 46.1K previous).

Moreover, the jobless rate improved from 5.7% to 5.5%, which is the lowest reading since March 2013. And the lower jobless rate is healthy to boot since the participation rate popped higher from 64.8% to a 10-month high of 64.9%.

Unfortunately for Aussie bulls, there was little follow-through buying after the jobs report came out, and so the Aussie’s price action became a bit mixed. However, iron ore continued to rise, risk sentiment continued to improve, and commodities staged a broad-based recovery on Friday after a week-long rout, which is likely why the higher-yielding Aussie was able to steadily claw its way higher against most of its peers while trading mostly sideways against the Loonie and the Kiwi.

The New Zealand Dollar

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

The Kiwi had another good run this week, marking the fourth consecutive week of broad-based Kiwi strength. That’s an entire month, yo! I’m pretty sure many Kiwi bulls are grinning from ear-to-ear right about now.

Anyhow, price action on the Kiwi was mixed at first, but it was already showing broad-based strength by Tuesday, probably because the themes (strong New Zealand economy, higher milk prices, etc.) underlying the Kiwi’s overall strength continued to drive demand for the Kiwi. Still, it was already clear by Tuesday that the Loonie was the king of pips (or queen if you like) and the Kiwi had a lot of work to do if it wanted a chance to beat the Loonie.

That chance finally came when net positive Chinese data, which sent the Aussie higher as mentioned earlier, also sent the Kiwi higher on Wednesday. Well, that and the risk-on vibes ahead of the FOMC statement. And as noted in Wednesday’s London session recap, it’s also possible that forex traders were opening preemptive bets ahead of New Zealand’s GDP report.

Sadly for Kiwi bulls, the FOMC statement rolled around and the Fed did hike as expected while maintaining the path for the Fed Funds Rate, which implies that the Fed is still open to one further hike this year. And that, plus Yellen’s cautiously hawkish tone and announcement that the Fed will start trimming its balance sheet this year, very likely put interest rate differentials into play and made Kiwi bulls think twice before bidding the Kiwi higher.

Sentiment on the Kiwi then really soured once New Zealand’s Q1 GDP report came out since it printed a 0.5% quarter-on-quarter rate of expansion, which is below the expected 0.7% growth rate. Year-on-year, New Zealand’s GDP only grew by 2.5% in Q1, missing expectations that it would match the annual growth in Q4 2016 by printing a 2.7% increase.

On a more optimistic note, 11 out of 16 industries actually printed growth, with the main drag coming from the 2.1% slump in construction output. The drop in construction output growth may be bad for GDP growth but it’s actually a good sign for New Zealand’s housing market since slowing activity there means lower chance for a housing bubble.

Market players probably realized that as well, although it’s much more likely that the broad-based commodities rally and improving risk sentiment, which sustained later demand for the Aussie, also very likely reignited demand for the Kiwi as well.

Anyhow, the RBNZ statement is coming up next week, so make sure to keep an eye on the Kiwi.

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

After a few weeks of mixed performance, the yen found itself at the bottom of the heap this week. And as usual, yen pairs were roughly tracking bond yields, U.S. bond yields in particular. As such, the yen gained strength on Wednesday when bond yields plunged hard because of poor U.S. data just before the FOMC statement.

The yen’s gains were capped, however, very likely because of the risk-on vibes ahead of the FOMC statement, although risk sentiment did begin to turn sour because of the poor U.S. data.

And unfortunately for the yen, yen pairs felt the pain in full when bond yields started to rise after the Fed pushed through with a highly expected rate hike while signaling that it still has room from one more hike this year.

The yen finally found some respite on Friday when yields began to dip, thanks to disappointing U.S. consumer sentiment and housing data, which reduced odds for another Fed rate hike, market analysts say. Even so, the damage was already done and so the yen closed out the week as the worst-performing currency.

By the way, the BOJ announced its most recent monetary policy decision on Friday. But that obviously only had minimal impact on the yen’s price action since the yen was more interested in tracking bond yields.

But if you’re want some of the details, then just know that the BOJ maintained its current monetary policy, so the policy rate is still at -0.10% and the BOJ still aims to keep the yields of 10-year JGBs at around 0% through its asset purchase program. And BOJ Shogun Kuroda specifically had this to say during the presser.

“The pace of our government bond buying will fluctuate from time to time depending on market conditions. The amount we buy would be determined based on how much is necessary to guide interest rates appropriately. We won’t set in advance the pace of our bond buying.”

Also, Kuroda emphasized that the BOJ will only start talking about an exit strategy from its “ultra-loose” monetary policy after it hits its 2% inflation target.

“There’s some distance to achieving 2 percent inflation, so it’s inappropriate to say now specifically how we will exit our ultra-loose monetary policy and how that could affect the BOJ’s financial health. Laying out specific simulations now would only create confusion. We will debate an exit strategy only after 2 percent inflation is achieved and price growth stays there stably.”

The Pound Sterling

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

The pound started the week by extending its post-election losses, as Theresa May’s Conservative Party and the Democratic Unionist Party (DUP) failed to announce a much-awaited coalition government, which likely renewed Brexit-related fears.

Pound bulls returned in force come Tuesday, though, probably because of profit-taking by pound bears and preemptive positioning by bulls ahead of the U.K.’s CPI report. And as it turns out, the U.K.’s May CPI report turned out to be better-than-expected, with CPI rising by 0.3% month-on-month in May (+0.2% expected).

Year-on-year, this translates to a 2.9% increase (+2.7% expected), which also happens to beat the BOE Staff’s own forecast of +2.7%, as laid out in the May Inflation Report.

The pound later got kicked lower, though, thanks to the U.K.’s jobs report, since wage growth disappointed further, with nominal average weekly earnings (bonuses included) growing only by 1.2% year-on-year in April, with a three-month average of 2.1%. This is the slowest annual increase since August 2014 and the consensus was that the three-month average would come in at  +2.4%, so a swing and a miss right there.

Real wage growth (inflation is taken into account) is even more disappointing since average weekly earnings fell by 0.7% year-on-year, marking the third consecutive month of annual falls and shows that higher inflation and poor wage growth is finally taking a toll on the income of Britons.

Thankfully, the FOMC statement was just a few hours away and so opposing currency price action came into play, limiting the pound’s losses but resulting in mixed price action on pound pairs.

The pound would later get slapped lower across the board on Thursday, though, thanks to the 1.2% month-on-month contraction in retail sales volume between April and May, which is a harder drop than the expected 0.9% slide.

No worries, though, since the BOE surprised the market with a 5-3 vote during Thursday’s BOE statement.

That’s 3 BOE members voting for a rate hike, by the way, when the market was only expecting Super Hawk Kristin Forbes to vote for a rate hike. Forex Gump has more on that, so read his write-up here, if you want more details.

Anyhow, there was minimal follow-through demand for the pound post-BOE, possibly because the minutes noted that despite the presence of more hawks, “All Committee members agreed that any increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.”

A much more likely reason, however, is that forex traders were hunkering down for next week, given that Brexit talks with the E.U. are expected to start on June 19. Also, the DUP and the Conservative Party have yet to announce a deal, although an announcement is expected on May 21 after the Queen’s Speech.

And on that note, I hope we’ll get more action from the pound next week.

The Swiss Franc

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

The Swissy had a repeat performance this week since it was the second worst-performing currency yet again. However, price action on the Swissy was actually rather messy.

Even so, the Swissy was tracking the euro as usual, although the Swissy was clearly showing more weakness on Wednesday (especially pre-FOMC statement), as marked in the sample pairs 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
USD/CHF (black) vs. EUR/USD (inverted, red): 1-Hour Forex Chart
USD/CHF (black) vs. EUR/USD (inverted, red): 1-Hour Forex Chart

In fact, if you look at EUR/CHF, we can see that the Swissy lost out to the euro pre-FOMC but before the poor U.S. data got released as well. It’s therefore likely that the Swissy was showing weakness because of the risk-on vibes ahead of the FOMC statement, as noted in Wednesday’s London session recap.

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

Risk sentiment later soured when the poor U.S. data got released. And interestingly enough, the Swissy weakened further instead of gaining the upper hand against the euro. No clear reason why, but the usual suspect comes to mind the sneaky SNB and its intervention activities (*cough* currency manipulator *cough*). The Swissy did eventually gain against euro post-FOMC, though.

However, the Swissy would feel the pain again come Friday, very likely because risk sentiment was improving back then.

Anyhow, these two bouts of appetite for risk, plus the Swissy’s suspicious price action pre-FOMC, are the reasons why the Swissy fared worse than the euro and ended up as the second worst-performing currency of the week.

The U.S. Dollar

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

Everybody probably already knows that the Greenback jumped due to the FOMC statement. But did you know that the Greenback still ended being a net loser anyway?

The first reason as to why the Greenback was a net loser this week is opposing currency price action from its competition. And as noted earlier, the Loonie, the Aussie, and the Kiwi were in strong demand this week, so that’s already three currencies that are difficult to overcome.

Another reason is that the Greenback’s jump due to the FOMC statement was not enough (on some pairs at least) to completely erase the losses it suffered from the earlier drop caused by poor U.S. data ahead of the FOMC statement.

As for specifics, headline retail sales slid 0.3% in May instead of increasing by 0.1% as expected. The core reading, meanwhile, also fell by 0.3%, which is biggest monthly slide in consumer spending in 16 months.

The U.S. May CPI report was also released at the time, and headline CPI was down by 0.1% instead of posting another 0.2% increase as expected while the core reading printed a 0.1% gain, which is a tick lower than the expected 0.2% rise.

And finally, the third reason why the Greenback had a bad run this week is that another set of disappointing economic reports, namely housing data and the University of Michigan’s consumer sentiment index (94.5 vs. 97.2 expected, 97.1 previous), were released on Friday, which caused the Greenback to slide broadly lower, tipping the scale in favor of the euro, although the euro’s win was so meager that the data feed of some brokers show the Greenback winning out.

Oh, if you somehow missed the FOMC statement for some reason, you can check out Forex Gump’s write-up on that here. The gist of it is that the Fed hiked as expected, but the Fed also maintained its projections for the Fed Funds Rate while announcing that it expects to start trimming its balance sheet this year. And all that was seen as a sign of the Fed’s confidence in the U.S. economy, which strengthened the Greenback.

The Euro

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

As mentioned earlier, price action on the Swissy was a mess, so you probably already know that price action on the euro was a mess as well. Heck, there are even diverging price action on some pairs.

Anyhow, this messy price action, as well as the euro’s mixed performance for week, indicate that opposing currency price action was dictating price action on euro pairs for the most part.

And as discussed earlier, the Aussie, the Kiwi, and the Loonie were showing broad-based strength, so the euro lost to these. The pound, meanwhile, had both positive and negative catalysts, but the BOE statement ultimately gave the pound the edge it needed to score a win against the euro.

Meanwhile, the yen was hurt was by bond yields while its gains were capped by the prevalence of risk appetite. Bouts of risk-taking also likely made the Swissy weaker than the euro, although there was also some wonky price action going on. And as a result, the euro was able to score victories against these two.

Against the Greenback, however, the euro only barely eked out a win. Price action on the Greenback was more uniform, though, so the Greenback was likely the one dictating price action on EUR/USD.

As to why the euro appears to be out of commission for the week, that’s probably because there were no top-tier economic reports this week. In addition, Brexit talks with the U.K. will start next week, so market players were probably wary of being positioned too deeply ahead of that.

Also, it’s possible that the market is still mulling about the longer-term implications of last week’s ECB statement since the ECB removed its easing bias on interest rates but maintained its easing bias on its QE program. Moreover, the ECB upgraded its growth projections while simultaneously downgrading its inflation forecasts.

Okay, here’s this week’s scorecard: