What in the world was that?!… I faintly hear you ask. Well, it was an opportunity for incredible value for the brave and woeful losses for the fearful! Take a look below at exactly what the dying hour of the first trading day of 2019 decided to deliver:
Dollar-Yen (USD/JPY), perhaps the golden compass of FX markets, is shown above. Yesterday, the cross posted its biggest intraday move in years, falling from around 109 Yen to the Dollar down and through the 105 level. Crashing by around 4% in less than 15 minutes, markets scrambled to understand exactly what was going on and what was causing such unprecedented moves.
The best explanation so far suggests that amidst and already risk-off environment to FX markets, the publication by apple of a downgrade to its sales forecasts catalysed intense selling pressure and a removal of cash from equities and into saver confines: The Yen. With Japanese markets still on holiday, sparse liquidity is thought to have forced a series of retail investors’ stop loss orders to trigger with active markets unable to fulfil the flurry of automated requests flying across trading desks across Asia. The event was fleeting, however, did leave its mark across the board.
Dollar Yen quickly recovered, albeit at a slight discount (approximately 1%) versus its pre-crash levels. But look elsewhere:
The Pound crashed by 1.37% in 13 minutes against the Euro. The story was much the same against the US Dollar in the chart above. The sudden discount in the Pound versus its major international counterparts in an immense opportunity for value creation and one of a magnitude that historical volatility would normally require weeks to prevail. Belief in the move and purchasing the Yen, selling the Pound and other weakening assets would have resulted in serious losses in the coming minutes and hours. However, taking a leap, calling the bluff, and bucking the trend could have left you up to 7.75% better off had you taken a gamble!
The lesson? Anything is possible! Particularly in the uncharted territory of 2019, what with a trade war still at large; Italy’s 2019 budget down but by no means out; BREXIT; an attack on the fed… So? Use the technology available… SGM offers you 24-hour trading opportunities via our new prepaid currency card platform and automatic execution orders.
Good Luck!
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Two tales of a weaker Dollar
Charles Porter
Thu 5 Sep 2024
Two tales of a weaker Dollar As the week that should decide the fortune of the US Dollar continues to unfold, this brief looks at the two very different legacies of a weaker Dollar. For emerging markets-EM and other high beta currency classes, a weaker Dollar can both act as a tail wind and a […]
Daily Brief – Not just about rates
Charles Porter
Tue 10 Sep 2024
The focus of next week’s Bank of England-BoE decision will not just be about benchmark interest rates. At a time when central bank meetings are most often scrutinised for clues regarding the outlook for domestic interest rates, this particular BoE meeting will have an important distraction. The next monetary policy decision is due next Thursday. […]
Daily Brief – Enough Labour Already!
Charles Porter
Tue 3 Sep 2024
Enough Labour Already! And no, I’m not talking about UK politics here. Despite the new UK government attracting significant attention in markets and the press ahead of the awaited/feared Autumn budget, this briefing is about the labour market. This week holds in store a plethora of US labour market data which is likely the biggest […]
