Flash Crash in the Forex Market

Adam Button of Forexlive says three things caused the crash...​

What's next according to Adam?

"There's no smoking gun here and other markets have weathered this in decent fashion. This looks to be more of a liquidity story and that means it could recover. Watch the 61.8% retracement of the AUD/JPY drop at 73.85 for a short-term signal."

 

.....unfortunately the retail forex accounts were not able to "weather" the forced margin liquidations.

 

Just curious for anyone who trades forex. Since forex does not close like CME futures for an hour, how was the execution of Yen pairs.

 

I don't trade this pair but it is rather incredible to look at. A true flash crash.

I would be surprised if the Tim Cook Apple tank caused this. It wouldn't have rebounded. Futures are still trading lower on that news and we will likely see a very nasty open tomorrow. I plan on being flat. I don't think there is a fundamental reason for this.

For once I think all the people who claim it must be the machines are probably right, and also not totally right at the same time. This looks to me like a massive liquidation event. As it was mentioned, people probably had massive sell orders sitting on key support levels. After the first one hit the rest of them tumbled in suit. The scale might have been due to machines, but the underlying cause would've occurred in outcry as well. The subsequent rebound was almost certainly the machines buying up as it rebounded over key supports again. I would've enjoyed listen to the forex squawk. Unfortunately I don't have a good service.

I wouldn't want to be one of the people on 100x leverage in one of those bucket shops when this happened. Eeesh.

 

Not a big deal. Occasional jokes from big boys. Players with low leverage won't be harmed.

 

Liquidity. Japan in the middle of a 4-day bank holiday, guess the market just needed a catalyst and it got one.

Apple shares dropped 7% after hours and AUD/JPY also dropped over 7%. Also heard Japanese exporters had USD/JPY puts with knockouts at 105.

 

The question is where from here ?

 

Anyone concerned with JPY capitulating into a liquidity vacuum from continued carry trade unwinding - the trend is your friend....
Cheers!

 

I short Aud/USD on December 31st. entry at 0.7060,,, take profit at 0.6950.

 

Test FX account being smashed as a good reminder to only do defined risk option trades. I'm too old for the rest, lol.