Flash accidents will continue in the currency market

Nasty things may happen at 7 in the morning :/ It’s the time in Tokyo when flash accidents take place. And if one time is an accident, 2 times is a coincidence, then 3 and more times is a regularity. In January 2016, at the magic hour, there was a collapse of the South African rand. In October 2016, the British pound collapsed. Finally, the Turkish lira and the Australian dollar collapsed in early 2019. Another nine holidays shifted to Monday starting from the year 2000 to attract more tourists are yet to be celebrated in Japan. The closest one comes on 14 January. It’s a good reason to search for some more candidates fond of dropping bricks onto their own heads. 

There are 6 cats at home, but the Christmas tree was overturned by drunk Dad. One would never have thought the yen to be that quick and reach yearly targets within 8 minutes. Blaming cats for overturning the Christmas tree makes no sense when investors are in the mood for Christmas and the main playground of the magic hour becomes the Australian currency market with the trade volume of $32 billion (a drop in the Forex see worth $5.1 trillion). A bigger fish was involved for sure. One can only guess when it will go hunting again and who’ll be its victim. 

Sclerosis is when you love somebody to so much distraction that you don’t remember who this somebody is. It’s hard to understand the investors who stick to loss-making positions hoping for a reversal of a downtrend. The more time you keep the Australian dollar and the Turkish lira in your portfolio, the higher the risk of facing a flash accident is. The main candidates for the victory in the category “Nothing is as bracing in the morning as an unnoticed doorjamb” are the South African rand, the Mexican peso and the kiwi.  There are still many holiday Mondays left in Japan, so Forex sharks will have a chance to have fun. So much the better as Jerome Powell’s talk about a protracted pause in the normalization of monetary policy has already become a yawn for investors. 

Patience is a wonderful quality, but life is too short to be patient. Probably, one could reasonably sell the US dollar amidst Fed’s dove rhetoric, but  what to buy then? The yen’s rise reminds of a jump of a dead cat. It’s not a fact that USD/JPY will have returned to January’s bottom by the end of 2019. The European economy is too weak to expect that EUR/USD’s rally will repeat like in 2017. The pound is plunged into politics. The Australian dollar fears trade wars, and the Canadian dollar - oil. Counting on the currencies of developing countries may end up in a flash accident. Should we choose the lesser of two evils and keep the greenback in the portfolio?

However, we could dream of another magic hour or “liquidity black hole”, as it’s often called. True, we will hardly sleep at night as it’s impossible to do when one muffin is afraid in the fridge. But it would be so wonderful to earn 8-10% without leverage within 8 minutes! And if we multiplied the earning by 100 and invested a big sum... Here we would get a Ferrari...and a yacht ...But before dreaming, just think : what if the drean came true and you were in a wrong boat?


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Price chart of USDJPY in real time mode

Forex chose victims

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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