Yen Surge Like a Tremor Before the Quake?
Near midday in US trading a wave of US dollar selling and JPY buying crashed over the market, sparking 20-50 pip moves in seconds. The moves came on no news and remain somewhat of a mystery but they do offer some clue on what's coming next.
Rumors of some kind of fat finger followed the spike and about 50K USD/JPY futures contracts traded in moments around the move, which is 5-10x the hourly average. But a fat finger would likely retrace and most of the moves held and some even extended.
That shows the bias toward buying US dollar dips might not be as strong as the overwhelming consensus toward dollar longs. The quick yen buying could also be symptomatic of a market that's growing more risk averse.
The main event in the hours ahead is the Australian employment report for July at 0130 GMT. The Australian dollar rallied a half-cent in the flash US dollar crash in one of the largest moves. It's likely that fast money was crowded into low-conviction short positions and was squeezed in the rally to 0.9374.Despite the rebound, AUD/USD is still in a delicate position and ultimately fundamentals will win out. The economy is expected to create 13.2K jobs but a soft number would re-plant the idea of rate cuts in the market and give the shorts a fresh reason to sell.
|Employment Change s.a. (JUL)|
|12,000||15,900||Aug 07 1:30|
|Fulltime employment (JUL)|
|-3,800||Aug 07 1:30|
|Part-time employment (JUL)|
|19,700||Aug 07 1:30|
|Unemployment Rate s.a. (JUL)|
|6%||6%||Aug 07 1:30|
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