Today is 15th April 2022 and the Forex market is behaving very strangely. You see, the spread has been skyrocketing and the price action has been very choppy. There have not been any catalysts for this behavior and it seems like the market is just in an endless spiral. What could be happening?
Today, we are going to take a look at some of the potential reasons why the Forex market has taken such a hit today. However, of course, there are no certainties when it comes to the markets and nothing is ever certain. The forex market is always evolving with new ideas and developments happening all around us, so you never know what will come next!
Mostly, the market behaves like this during holidays like Christmas when volatility is high due to the lack of trading. And today, of course, is “Good Friday”; which is a bank holiday in the UK and a few other major countries.
As you can see, the price action is very choppy and the spreads are high today as well, whenever the price is getting close to the EMA.
So, what factors often influence the market to behave like today? [Full of fluctuation and uncertain volatility]
Reason 1: Manipulation
The first possible reason why the Forex market has been behaving like this is likely to be manipulation. However, you might think that the current level of trading volume makes it very difficult to manipulate a market that isn’t under enormous pressure.
Again, if you notice “carefully”, there is a lot of large trading looking to be taking place around the time of this post. The amount of trading is simply not enough to push the market in one direction and we can never say if there was a potential manipulation or not. Is it so?
Well, the possibility is that a few big players are controlling the market “solely” today with no intention of being filled on those orders. They want to make it look as if there are lots of buyers or sellers within the market fighting with each other. It’s not! This type of market manipulation is called spoofing.
Reason 2: Potential Reversal
The market usually reacts in the direction that it has been trending for quite a while before. This is because the market needs to build up enough momentum before it can change direction. So, if you see the price action beginning to reverse, you will start to see large movements in either direction.
If a Full-market reversal is coming, you often see unnatural volatility in the price action. However, once the volatility levels return to normal, you will see a large move in one direction or another.
This is often the case with most news as well. If you see any sort of news that can potentially have a very positive or negative impact on the market, you will usually see some volatility immediately after. This is because the market has built up enough momentum in order to reverse direction and it knows that it needs to do so before it gets too late.
Reason 3: News
One reason why the forex market is behaving like this today could be because of the news. The market tends to react very quickly to news and you can notice this if you take a look at a news feed for the Forex market.
As soon as you hear about any sort of certain event, you will immediately see a large reaction in the Forex rates. This could be due to any number of reasons, although it most likely has something to do with potential interest rate changes or possible inflationary numbers coming out from individual countries.
If the majority of mainstream media has been reporting on these issues lately, this could potentially have had an impact on the market today.
Should you avoid trading today?
Well, yes. Uncertain and unnatural volatility is a thing you always want to avoid, no matter what. You should always try to wait for a clear sign before you start trading again. This is simply the nature of any market but especially true in the forex market.
The Forex market is one that you cannot predict and this is what makes it interesting. However, there are times when you simply do not want to be involved in the market, where there seems to be no clear direction of where the price will go next.
When this happens, it can often result in heavy losses and that is why you need to ensure that you only trade when you know what you are doing.
Today I would wait at least till the NY-London session to trade again.
What do you guys think?
Comment below and let us know your opinions.