“What would you say about the FX market being too big for manipulation? I’ve heard this so many times, but the recent price action of EURUSD just screams the opposite. The big banks RULE the markets and they do whatever they want. How can we small players survive in this market?”
A. I’ll put it this way. The forex market can be influenced by a big player or two in the near-term but not manipulated for very long.
For example, you might be tempted to say that a certain Asian central bank manipulates EUR/USD all the time… I would suggest they sometimes get it right but quite often get it wrong. When they get it right, traders on the other side of the trade cry “manipulation”.
When they get it wrong (like in November when they bought EUR/USD from 1.40 on down below 1.29), no one says a peep…
More than manipulation, it is simply supply and demand at a particular point in time. Big funds, corporates, central banks can all move markets from time to time but there are also instances when large flows come into the market and the market does not move as you would expect. Those are the inflections points.
So next time you hear “tons of central bank bids around x.xx and the market drops right through that level, you’ve learned a valuable lesson: That the sellers have overwhelmed the buyers…
