USD/JPY: Falling to sharp record lows on a frightening lack of liquidity / harsh selling. This morning, a sharp retracement bringing the pair back up to fill in the liquidity gap which started at 79.76, which in turn acts as resistance.
EUR/USD: Subdued for now, hawkish rhetoric staying in the background covered by high yielding currencies sinking due to global risk pulling
AUD/USD: Felt the grunt earlier of sinking higher yielding currencies, and following in a similar manner as USD/JPY: coming to the top of the liquidity gap.
First, a couple of articles to help brief you on what's been going today:
Reuters: http://www.reuters.com/article/2011/03/17/markets-global-idUSL3E7EH00O20110317
Let's take a look at where we stand technically in terms of this event. First, USD/JPY today, 15 minute chart:
USD/JPY correlation versus the S&P 500 Index
Gaps like this come, gaps like this go. So where, really, have we seen something like this before? Let's take a look back at the flash crash of 2010. As you can see, a very similar pattern unfolded then as much as it did today on this kind of selling pressure:
One certainty we can learn from this is that we now, technically speaking, have gaps wide open resting at the base of this spike today. As easy as it would be to compare today's events to the flash crash, they are two extraordinarily different circumstances from a fundamental perspective. From a technical one, they are certainly showing some similarities. USD/JPY is considerably lower than it was back then and we are in the midst of a major, unavoidable disaster. For the sake of Japan we can root for a higher UJ but in the meantime the markets remain as they are from a truly mechanical perspective.
Update March 17th 8:46 EST: BOJ takes their currency lower and USD/JPY hikes past major resistance levels. As any technical explanation will do, and I reiterate from above, fundamentally, we are in a very different situation.
Floor is open for discussion> feel free to fire away:
