Saturday February 14, 2015 - 13:46:28 GMT
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Global Traders Association - www.tradersadvocate.com
Forex Market Instability Again - February 15, 2015
Major Price Gap
I just wrote a piece for GTA in the past week entitled Market Volatility is Good and Instability is Bad . In the article I made the point that recent actions by regulators to curb speculation in forex markets have had the effect of robbing liquidity from the markets. The loss of speculation has paradoxically made trading riskier for those using the markets for routine necessary business purposes. On Thursday we saw a perfect example of the concerns I was addressing. Early that day there was a press report saying the Bank of Japan felt that any extra stimulus would be counterproductive for now. The observation was not new news, but the headline was good for a fall in USDJPY from 120.35 to 118.60 in less than 10 mins. A price move of this magnitude typically might take a number of days. Speaking as someone who has been in the forex market for over four decades, a move of this magnitude in 10 minutes meets any of my tests for market instability. Without going into detail again, speculators are crucial players who seamlessly "fill the gaps" between periods when there are no commercial bids or offers in the markets. Its time that regulators back off on ill-considered concepts such as the "Volcker Rule" and its unintended consequences.
Politics Major Factor
The EUR and Eurozone got a lift this week from another ceasefire agreement in Ukraine. I don't have a lot of confidence that this ceasefire will hold, but it removes some uncertainties in the markets for the time being and has been constructive for the EUR and European bourses. There are hopes by many that the accord will free up Eurozone leaders to address more squarely the current Greece financial crisis and bring that closer to a more permanent solution. In the latest week there seems to have been some progress in the talka. For now this prospect is positive for the EUR.
A number of major data releases are expected this week, but most are unlikely to be major market movers. The U.K. will see key CPI data, latest employment statistics and Retail Sales figures. The German ZEW Sentiment survey will be released on Tuesday. On Friday, the first round of flash PMI data will be released from a number of key economies. Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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