Categories: Market Overview

FxPro: USDJPY and AUDUSD flash-crash on the thin market

The foreign exchange market is experiencing serious turbulence in the first days of the new year. At the beginning of the Asian trading on Thursday, the Japanese yen added more than 7.5% to the dollar in a matter of minutes. The Australian dollar collapsed by 8% against the yen and by 5% against the dollar for no apparent fundamental reason.

In fact, we saw some kind of forex flash-crash, when markets are experiencing very sharp and significant movements due to the trade in high-frequency computer-driven algorithms. It is worth mentioning that AUD has managed to return significant part of initial losses. AUDUSD traded by 07:00 GMT at 0.6945, against 0.6980 at the beginning of the day and intraday lows at 0.6635. USDJPY was at 107.0, after failing to 99.90, compare to 108.65 at the start of the day.

Behind such crashes there is often a combination of unfavorable factors, which strengthens the market’s magnitude: reduced market liquidity, proximity of significant levels, the presence of a trend.

Market activity remains subdued as most participants have not returned yet after the New year holidays. In particular, the stock exchanges are still closed in Japan. Moreover, the explosion of volatility occurred at the very beginning of the Asian trading, after the closure of the American exchanges and long before the start of European session.

Decrease of USDJPY accelerated after falling below 108.0, which has been a significant level for the last 1 ½ years. The decline was even more accelerated when the rates immediately approached 105.

AUDUSD also attracted the attention of the market players, coming up in the previous days to 0.7000, the support level for the last three years and minimums for almost 10 years.

As in the case of JPY, AUD sharp weakening became an extreme development of events but coincided with the existing trend: markets continue demand for safe-heavens, which is also seen in the rising gold prices and pressure for the world stock markets.

It is hardly expected that the buying after flash-crash in pairs AUDUSD and USDJPY lead to reverse in trend for decline as the key fundamentals are still in play. In addition, the market showed its vulnerability to drawdowns. In these conditions, there are high chances of further sales on the highs, unless the monetary authorities of Japan will not come out with verbal or currency interventions, fearing the negative impact of the yen’s volatility on the economy.

Alexander Kuptsikevich, the FxPro analyst

The FxPro Analyst Team

Our team consists of financial market experts. Our dedicated professionals prepare reviews on the foreign exchange market situation, Crude Oil, Gold and Stock Indices. All the analysts are regularly published in the world leading economic media.

Share
Published by
The FxPro Analyst Team
Tags: audjpyusd

Recent Posts

EURCHF Wave Analysis 20 December 2024

- EURCHF falling inside minor impulse wave 5 - Likely to fall to support level…

2 days ago

USDCHF Wave Analysis 20 December 2024

- USDCHF reversed from resistance zone - Likely to fall to support level 0.8860 USDCHF…

2 days ago

The US dollar ends the year on a strong note

The US dollar is at two-year highs. Factors such as changes in the Fed's monetary…

2 days ago

How deep will crypto dive?

The crypto market is experiencing a decline, with a potential further drop in value. Bitcoin…

2 days ago

EURGBP Wave Analysis 19 December 2024

- EURGBP reversed from support zone - Likely to rise to resistance level 0.8300 EURGBP…

3 days ago

EURJPY Wave Analysis 19 December 2024

- EURJPY broke resistance zone - Likely to rise to resistance level 165.00 EURJPY currency…

3 days ago

This website uses cookies