WorldWideMarkets Community

Forex Trading, Market News & Technical Analysis

Dollar Slide at London Close Began on the CME

Posted by Joseph Trevisani on Aug 6, 2014 1:58:00 PM

A mundane afternoon market was suddenly transformed into a cascading dollar collapse today when within the space of two minutes the U.S. currency crashed against most of its major trading partners.  From 12.15 pm to 12:17 pm in New York the dollar lost 19 points against the euro, 51 versus the yen, 20 against the sterling, 40 against the Australian dollar and the dollar index (DXY) shed 14 points.  

The perfect coincidence of the events, beginning and subsiding at exactly the same time, made it unlikely that the various currencies were responding to a provocation from within a specific currency but that all the pairs were answering a catalyst from outside the spot market.

Two sources identified the culprit as the CME Yen futures contract (JYU4) which, depending on the story saw a huge 25,000 contract execution of about $3 billion notional value, (zerohedge 12.21 pm, http://bit.ly/1pbga7d) or a mistaken 'fat finger' trade of 27,000 contracts (Market News International, 12:53 pm) which drove reactive dollar selling across the market. Since none of the pairs subsequently regained their previous levels and the biggest decline was in the dollar/yen, an execution rather than a mistake is the more plausible explanation. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

jyu4r

eurr

yenr

gbpr

audr

dxyr

 

Tools & Educational Resources

Forex 101LEARN MORE >>
Learn the basics of Forex and how to practice trading the markets.

GlossaryLEARN MORE >>
Confused by the language? Click here and search for key trading terms.

FAQ CenterLEARN MORE >>
Browse our frequently asked questions and find your answers right away.

VideosLEARN MORE >>
Access to the educational lessons, webinars and platform walkthroughs.

READY TO TRY THE MARKETS?

Get started with a FREE $10,000 Demo Account and experience the Forex Market RISK FREE!