Context On Japan (Forex: USDJPY)
11 March 2011, 11:46 local time, the Tōhoku earthquake shook Japan near Fukushima. The following tsunami woke up the power network in the whole area, and the Fukushima Daiichi Nuclear Power Plant couldn’t cool off its cores.
At the time, my friend and I were talking about the high possibility that the Japanese Yen could strengthen against the US Dollar, but after four days, nothing happened. He shorted the USDJPY pair and kept it the entire week.
Around 9.00 pm Bucharest time, I got a call from him saying: ‘Have you heard what happened on USDJPY?” I wasn’t at the PC then, so I’ve paused. “I tell you what happened – it just melted and has no liquidity to close the transaction.”
So, what happened in that evening in Forex market?
USJPY felt around 5,000 pips in the course of a matter of less than ten minutes (about 3% downside movement).
Here is the photo of that Friday evening short movement in terms of market volatility, courtesy of St. Louis Fed (source).
