Million Dollar Challenge

USDJPY Falls 300 Pips In A Few Minutes!
USDJPY fell around 300 pips today and then recovered. Flash crashes are becoming a norm in the currency market. We currency traders should be aware of this fact. Bank of Japan (BOJ) controls Japanese Yen and most of the time it intervenes to keep it weak as compared to other currencies. A strong Japanese Yen is not good for Japanese exports. On the other side we have US Dollar. US Dollar is the international currency that is most used in trade and commerce. Most of the time we will see the the move originating in the US market and then rippling through to the rest of the global financial markets. Take a look at USDJPY H4 chart:

Now you can see in the above charts, USDJPY is already in the downtrend. Then we have a big bearish H4 candle. This drop in USDJPY price happened during thin market hours i.e the Asian Market Hours. When there is a huge sell order and the market is thin, we have a flash crash. We currency traders now risk facing a flash crash on a constant basis. We should be always ready for a flash crash. If you are on the right side, you can make quick pips and if you are on the wrong side, you can get burned.

Flash crashes are highly risky. When the price starts dropping, there is no one who is willing to buy. So the stop loss that you have placed most probably will not work as a risk management measure. Price will fall and you will see the stop loss didn't execute as no one was willing to take the buy side. So you should be ever vigilant against these Flash Crashes.Take a look at USDJPY M5 chart:

Now you can see above USDJPY price fell and we have two very big 5 minute candles. After that USDJPY price recovers and the USDJPY starts rising. This is precisely what is happening in most of these flash crashes. Price falls rapidly and then it recovers in the next 5-10 minutes.

Pfizer announced a new Corona virus vaccine that has a success rate above 90%. I was trading and didn't check the announcement. When I looked at USDJPY chart, it suddenly jumped more than 200 pips. I was perplexed. I looked at a few famous forex news sites and found out that Pfizer has made announcement about a new vaccine and the currency market and the stock market has become suddenly bullish.
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If you look at the above USDJPY chart we have small candles on H4 chart.  Small candles with small bodies are always an early signal for an impending breakout. It was night here where I live and offcourse morning in US when Pfizer broke the news about the new vaccine last week. During the next few hours the market absorbed the information and then at 3:00 AM in the morning here we had the USDJPY breakout. USDJPY moved up 200 pips. EURUSD and GBPUSD also reacted but their reaction was not as big and was mostly muted. EURUSD moved around 60 pips whereas USDJPY moved around 200 pips. There can be many reasons. Each currency pair is different. Many banks and hedge funds have invested in JPY due to the US Presidential Elections. As the elections are over now, most  of these banks and the hedge funds are going to unwind. Whatever this is how I understood this movement. But I just look at the charts and do what the charts tell me to do. I don't care the why behind the movement.

Yesterday Moderna made the annoucement that they have also made a Corona virus vaccine which is more than 94% effective. This time USDJPY moved around 60 pips. Market did not react much. SMA200 is an important S/R level. You can see USDJPY find resistance at SMA200.
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USDJPY made a huge rally last week. It moved around 500 pips. USDJPY always surprises you. Most of the time it moves in a range. But then when it moves all of a sudden it moves big time. Most probably the USDJPY rally was the result of Russia Ukraine war fears abating. Then there was the Federal Reserve also working behind the scenes. In the last few days FED has reduced the stimulus to fight the pandemic economic effects. This has strengthened the USD as the interest rates are going to be increased. Bank of Japan BOJ is also working behind the scene on its currency JPY. So there were many factors behind this huge rally. USDJPY just moves when it wants to move. But we always get surprised because the move is always sudden. These factors sometimes work and sometimes don't work. So this makes currency trading an amusing game. You never know how it will go. This is the reason most of the time I avoid trading USDJPY. Today is FOMC Meeting and USDJPY looks to be bullish. FOMC Meeting is a few hours away. The hope of a ceasefire was the main trigger for this huge USDJPY bullish rally.


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