Be Careful Of A Yen Flash Crash In The Next 10 Days

Well, Japan's off for a 10 day holiday (incl weekends) from the end of April to the 6th of May. That's going to mean thin liquidity during the witching hours when New York goes to sleep and before Hong Kong comes online. If the flash crash on the 4th of January is any indication, the yen could be in for a rough time again.

Anatomy of a crash

So there's a lot of blame for the crash being laid on algos or bots but i think that's just pinpointing the actors rather than the structural vulnerabilities in the market. Here are the similarities between the Yen flash crash earlier this year and the GBP flash crash a couple of years ago after the Brexit vote.

• Prices pushed to extreme levels ( 400-500 pips from the 200d sma)
• Lack of orders to absorb drops below key levels because the prices were already stretched
• Large option expiry
• Not enough human actors to step in at odd hours

Again, these factors could also play in the other direction as well. However, just as with the last time, the price is pushing downwards although the price is about 100+ pips away from the moving average. Concerning though is the TRYJPY as that is pushing a fair bit lower and was blamed for the crash at the start of the year.

Playing this

If you can, open small long positions 500 pips away from the daily opening price every day and close them if not filled at the end of the day. Depending on your capacity, you could place another one 1000 pips from the daily opening price as well.