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  • #621
  • Mar 11, 2011 9:50am Mar 11, 2011 9:50am
USD rise / JPY fell when fundamental values didn't change (or even when the tragedy favors the the opposite of price movement as dragan53 posted) during an obvious volitile period.

Buy stops located above 83.0 were able to take big money sells as you can see in the consolidation before it dropped.
  • #622
  • Mar 11, 2011 9:51am Mar 11, 2011 9:51am
Quoting CindyXXXX
Because Japan is a net-exporter of capital. Money that would otherwise be slated for overseas investment in search of higher yields is suddenly diverted to domestic use. In Addition, Japanese insurers invest large amounts overseas on higher-yielding instruments and are forced to bring those funds home to pay claims. Foreign insurers also have to buy JPY to pay claims.
Living here in the Japan, the images on television are devastating.

Examining what happened to the UJ, orderflow can possibly explain a lot. Price initially spiked up 50 pips to take out stops above 83.10. Then fell down (due to the vacuum?). Don't we see this happen all the time after major news announcements? The first move is a fake out...

Then price fell back down and ran stops at 82.60, 82.20, and now at 82.00. You can bet it has its eyes on 81.70 and 81.50. I'm not saying there aren't legitimate fundamental reasons for this drop. But you better believe a group of traders are using this as a chance to make some serious money. And some brokers are taking this opportunity to clear their orderbooks.
  • #623
  • Mar 11, 2011 10:10am Mar 11, 2011 10:10am
Quoting Magic Trader
Living here in the Japan, the images on television are devastating.

Examining what happened to the UJ, orderflow can possibly explain a lot. Price initially spiked up 50 pips to take out stops above 83.10. Then fell down (due to the vacuum?)....
First move might be just traders escaping from long yen positions in impulsive panic mode after the earthquake news hit the board (NZD weaken a lot during first hours after the earthquake but this is different since NZD is higher yield currency). Now with yesterday strong risk aversion theme, long Yen TA setups and todays terrible disaster, Yen at the discount price was very attractive for speculators. Just my 2c
  • #624
  • Mar 11, 2011 10:38am Mar 11, 2011 10:38am
Quoting Greenhaze
First move might be just traders escaping from long yen positions in impulsive panic mode after the earthquake news hit the board (NZD weaken a lot during first hours after the earthquake but this is different since NZD is higher yield currency). Now with yesterday strong risk aversion theme, long Yen TA setups and todays terrible disaster, Yen at the discount price was very attractive for speculators. Just my 2c
Thumbs up green! First reaction is knee-jerk. Fade it.
  • #625
  • Mar 11, 2011 10:42am Mar 11, 2011 10:42am
Quoting Carnegie
Thumbs up green! First reaction is knee-jerk. Fade it.

With the greatest respect that's easy to say after the event. The reality is not quite that simple I'm afraid.
He was looking for the card so high and wild hed never need to deal another
  • #626
  • Mar 11, 2011 10:51am Mar 11, 2011 10:51am
Quoting dr_who
With the greatest respect that's easy to say after the event. The reality is not quite that simple I'm afraid.
Ofcourse, you are correct, doctor! I should not have written it that way and I'm happy you corrected me.
The truth is that I have been studying some of it and my conclusion is that (don't take my word for it!!) IF the price action after some news event or something in the like appears to be wrong, then it's just uninformed order flow and will eventually be faded. Don't want to say to much here (no bullshit - it's not that I am trying to hide anything.. I just have't got that far yet) but it seems to me that most of the news events look like this.

Thanks for pointing it out doctor, you are correct there and hope everybody understand what I mean!

Ps: I'm looking for good essays and other small PDFs/ebooks about market microstructure/FX-microstructure/zero-sum (and all of that).. do you guys have any you can post up here?

Thanks!
  • #627
  • Mar 11, 2011 11:55am Mar 11, 2011 11:55am
Fade the defenders and fade the hunters would be the next step.
  • #628
  • Mar 11, 2011 11:56am Mar 11, 2011 11:56am
OK....Anybody has any idea why USD is being sold so strong now?

Is it the friday thin liquidity or QE3 just kicked in
There must have been some BIG stop orders above the 1.3850.
  • #629
  • Mar 11, 2011 12:18pm Mar 11, 2011 12:18pm
Quoting Greenhaze
OK....Anybody has any idea why USD is being sold so strong now?

Is it the friday thin liquidity or QE3 just kicked in
There must have been some BIG stop orders above the 1.3850.
I was looking in to that also. First, I think a lot of USD were bought via the USD/JPY stop hunt rise which could lead to a stronger selloff. Then, I'm not sure it was of bc USD/JPY found liquidity from 8-10amGMT or if value traders focused on the USD/JPY pair but the dollar was bought up again. Now its headed back to previous levels via selling.
  • #630
  • Mar 11, 2011 12:31pm Mar 11, 2011 12:31pm
Quoting EmeraldEyes
I was looking in to that also. First, I think a lot of USD were bought via the USD/JPY stop hunt rise which could lead to a stronger selloff. Then, I'm not sure it was of bc USD/JPY found liquidity from 8-10amGMT or if value traders focused on the USD/JPY pair but the dollar was bought up again. Now its headed back to previous levels via selling.
I wish i would understand something but i am not able to extract one clear thought from this. It sounds way to complicated for my friday evening state of mind.
  • #631
  • Mar 11, 2011 12:39pm Mar 11, 2011 12:39pm
lol sorry. I ment there were a lot of USD longs trapped on the wrong side of the market today which is accelerating a selloff before end of the week.
  • #632
  • Mar 11, 2011 1:08pm Mar 11, 2011 1:08pm
Quoting UnnamedPlayr
Fade the defenders and fade the hunters would be the next step.

UP, could you elaborate?

To me, it seems like fading the defenders and fading the hunters are mutually exclusive. In other words, if you're fading the defenders, then you're trading with the hunters.

I guess you could be suggesting to fade the defenders (trade with the hunters) until the stops are triggered, then fade the hunters (fade the stops) while price goes back to its perceived value.

Is that close?
  • #633
  • Mar 11, 2011 3:02pm Mar 11, 2011 3:02pm
Yes that's it.

Or alternatively: fading the hunters when the level hasn't been knocked out.
  • #634
  • Mar 11, 2011 3:12pm Mar 11, 2011 3:12pm
Quoting UnnamedPlayr
Yes that's it.
Great, thanks.

Quoting UnnamedPlayr
Or alternatively: fading the hunters when the level hasn't been knocked out.
That's another approach that I've been tinkering with lately.

Have a nice weekend!
  • #635
  • Mar 12, 2011 4:53am Mar 12, 2011 4:53am
more about the jpy quake
from forexlive


Traders sold USD/JPY heavily this morning in anticipation that Japanese insurance companies will need to repatriate higher-yielding overseas holdings. Foreign reinsurance companies are seen having to buy JPY as well to settle claims. We dipped as low as 81.65 before steadying and rebounding to 81.90 at the close. Bids are seen toward 81.50 in size; large stops are noted below.



so at the end,its more panic and stop hunting effecting the currency on expectations of other market movers behaviour
to the crisis
  • #636
  • Mar 12, 2011 5:53am Mar 12, 2011 5:53am
Quoting dragan53
more about the jpy quake
from forexlive


Traders sold USD/JPY heavily this morning in anticipation that Japanese insurance companies will need to repatriate higher-yielding overseas holdings. Foreign reinsurance companies are seen having to buy JPY as well to settle claims. We dipped as low as 81.65 before steadying and rebounding to 81.90 at the close. Bids are seen toward 81.50 in size; large stops are noted below.



so at the end,its more panic and stop hunting effecting the currency on expectations of other market movers behaviour
to the crisis...
There was another one on IFR about Japan's foreign investment. Half of it is in the US and I think that explains massive selling of USD across all USD pairs.
  • #637
  • Mar 12, 2011 6:49am Mar 12, 2011 6:49am
For all to enjoy. Happy reading.
Attached File(s)
File Type: pdf stop_loss_cascades.pdf   129 KB | 981 downloads
File Type: pdf Foreign Exchange Market Microstructure.pdf   118 KB | 576 downloads
  • #638
  • Mar 12, 2011 10:54am Mar 12, 2011 10:54am
Hi Louie,

Thanks for posting the 2 pdfs. However, I can't get either one to open.
  • #639
  • Mar 12, 2011 2:18pm Mar 12, 2011 2:18pm
Quoting ajt1970
Hi Louie,

Thanks for posting the 2 pdfs. However, I can't get either one to open.

Google Foreign Exchange market microstructure, should find this file easily, Georgetown edu.

Google Stop loss orders and price cascades in currency markets. Should find this pdf author C. L. Osler

Hope this helps.

Have a good weekend.
  • #640
  • Mar 12, 2011 2:53pm Mar 12, 2011 2:53pm
Thanks Louie. I found them.
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