07.01.201914:01 Forex Analysis & Reviews: The yen is the forerunner of the storm

The best time to attack is when the opponent is sleeping or celebrating. It is relaxed and is unlikely to seriously resist. New Year's festivities allowed the "bulls" on the yen to conduct a rapid attack on the camps of competitors, which resulted in a decline of AUD / JPY and USD / JPY by 8% and by almost 4% within 8 minutes. Turkish lira lost 10% against the money of the Country of the Rising Sun. Such an extraordinary event, called a flash accident, happens extremely rarely and is a precursor of large-scale shocks. Similar yen rises took place on the eve of the Russian default of 1998 and the global financial crisis of 2008. Storm! Soon the storm will break out!

Investors do not tire of puzzling over the question of what it was. Obviously, only one thing happened in the thin market. Not only is the time when the American players turn off the monitors, and the Asian ones just turn them on, is characterized by a lack of liquidity, so the holidays have also contributed. This hour is sometimes called "witchcraft." The "black hole absorbing liquidity" sounds even louder. If an average of $ 2.7 billion passes between the end of the American Forex session and the beginning of the Asian one on the CBOE Global Markets trading platform, the figure of $ 5.5 billion occurred at the auction on January 3.

Formally, the catalyst for a surge in interest in the yen was the first fall in Chinese manufacturing activity in the manufacturing sector below the critical level of 50 in the last 19 months, and Apple's announcement that sales of the iPhone and other products in the Middle Kingdom were declining. The situation was aggravated by excessively bloated net shorts on the Japanese currency, the size of which reached a maximum of 2018. In fact, information from Apple arrived about an hour before the flash accident, and it's not at all necessary that the Chinese are reluctant to buy iPhone due to the slowdown in the economy. It is possible that consumers switched to Huawei and Xiaomi products.

Flash crash

Of course, the parallels between the Russian default and the global financial crisis, on the one hand, and the sharp upsurges of the yen, on the other, can be done, but the behavior of other safe havens convinces that it is not the fears of the global economy that played into the hands of the yen. For example, the Swiss franc remained indifferent to both the release of Chinese PMI data and the Apple statement. As for speculative shorts, the statistics on them and so goes out with a delay, and here the situation is aggravated by the disconnection of the American government. The data was relevant as of December 21.

The most likely cause of a flash crash seems to be the actions of algorithmic systems, the efficiency of which increases in the thin market. However, the official Tokyo from this is not easier. At the end of 2018, the yen strengthened against the US dollar by 2.4%, which is its best dynamic since 2008, and then there was also a flash accident. As a result, exporters, corporate profits and the Bank of Japan, which already cannot boast of success in taming inflation, suffer.

Technically, the implementation of the target by 88.6% for the Shark pattern enhances the risks of a rollback to 38.2% and 50% of the CD wave, where it makes sense to sell a pair of USD / JPY.

USD / JPY, the daily graph