Forex Strategy Video: Liquidity Can Leverage USDJPY Break Into Yen Cross Tumble
• Value is determined by the market and liquidity determines level of influence
• USDJPY has marked a critical technical break of a head-and-shoulders pattern with a 116 'neckline'
• While the collective Yen crosses can drop on risk aversion, USDJPY can drag its counterparts down with it
Major fundamental themes can move the market. 'Risk trends' for example is all consuming and spans all assets. However, what actually moves markets is the flow of capital. And, when it comes to FX; some pairings are a lot more liquid - and therefore influential - than others. One of the biggest moves amongst the majors recently has been the USDJPY's collapse following the short-lived rally after the announcement of negative rates by the BoJ. In a week's time, the pair dropped 550 pips to a prominent 15-month support at 116. It then proceeded to clear that floor and its momentum has yet to flag. USDJPY is not the most liquid Dollar-based pair, so it will not redefine all the 'majors'. However, it is the most heavily traded Yen cross by a wide margin. Concerted Yen buying on this particular pair in other words can motivate a bid for its counterparts. We discuss how liquidity and volatility can leverage a broader market move in today's Strategy Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.