In four days, USD has slumped nearly 6% against JPY. It happened before but I still feel very weird. Everyone thinks it would go down but without any catalyst, how can such a big move happen? During the process, it has taken a break for 3-4 times and then been pushed down again. Even it has hit a 14-year low, it's further sold down 200bps to 84.6.
Meanwhile, the hike at EUR/USD is relatively mild and not impressive. There is no major force behind it. At first, I thought maybe it's because of the heterogenous patterns between the two pairs, or because of liquidity problem. I even thought this is the engine while the JPY is the follower. I later corrected this thought after seeing the bungee on USD/JPY. But after the Dubai crisis appeared, I have another possible scenario emerging in my mind.
Is it possible the major players, i.e., banks, front-run us? They kept parking to the safe harbor at JPY. And the move at EUR/USD is just some pegging mechanism. That's why when the news comes out, we see the trend in USD/JPY continues while EUR/USD reverses. The followers get it all wrong.
As I have said before, there is no way to predict a black swan when you are facing a competitor like the big banks. Their edge is too obvious and powerful. Your experience may help. You may have seen this black swan this time. But what if it's a different black swan next time?
Still need to dig deep into fundamental research or refer to quantitative approaches. A long way to go, I tell myself.
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