With Japan away, risk of flash crash returns, via Reuters
Part of the modern FX landscape I am afraid, but the spectre of flash crashes are ever present. Now, whereas we can't predict when a flash crash will occur we do know when they might occur. A key time is when the market is in a illiquid state. The hour after the US session close and before the Asian open is always a vulnerable time and that is made all the more so now that Japanese markets will be closed from April 29 to May 6. Twice this year we have seen the JPY spike when Japan has shut, once in January and once on February.
May 1 is cited as particular vulnerable as Japan, China and most of Europe will be off too. The Fed is meeting later on that day and liquidity will be low until the US get to their desks. Also, we know that algo's can be turned off during volatile times and make the illiquid environment worse. The Reuters report had some analysts recommending buying the yen agains the AUD in anticipation of a large move. The Tokyo Financial Exchange has asked its retail clients to beef up their margin deposits or lighten their positions before the holidays.
So, watch out for any return of the flash crash
For a recap on January's flash crash see here. You can also see Eamonn's timeline of the event here.
