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Introduction: Over the last two trading weeks, markets have seen no volatility on USD/JPY at all. That stopped on Wednesday of this week when USD/JPY ripped out of the consolidation zone, moving 71.3 pips (.64%) within 8 hours. This move, however, was followed by a rapid decline in price and the market is currently sitting down 82.7 pips(.74%) and has been as down as much as 102.2 pips (.91%). The main reason for this, in a nonfundamental way, was due to price manipulation also known as stop-loss hunts.
We saw prices consolidate for multiple weeks before USD/JPY finally decided to begin its a short-lived rally. The reason behind these moves is that large institutions need to accumulate sell positions. The only way to do this is to create a false bull market. This is why these manipulation moves rocket up so quickly and then fall over a much longer period of time. They pump the markets will buys (or close sells) and then after the market begins to rally all different funds and retail investors begin to hop on the ride. During this time the large institutions are selling positions (whether it’s closing or opening shorts) to those taking longs. Eventually, retail traders and other institutions will begin to take profit thus not supplying those selling to them with the liquidity to sell into the pushes without moving markets. Now, the only way to continue to accumulate sell positions is to place market orders that move markets to the downside, which is when the markets being their moves to the downside.
Looking at the daily we can see how USD/JPY accumulated at/in a previous daily resistance for multiple weeks. We also saw that when our large manipulation moves to the upside was not able to close much outside of the major zone. This is because above the daily zones are where take profits will be held, stop losses on sells, and new orders for sells. Looking at the daily it also shows how much of a potential free space we have and how massive the bearish engulfing today controlled the last few weeks of trading.
Conclusion: All in all, this week we had a textbook example of manipulation on USD/JPY. Markets typically don’t consolidate and then blast off straight away, first moves are likely manipulation moves. When looking at these moves from a technical standpoint it is important to look at the daily zones as we did today as well as how fast the medium timeframes zones move (the 4 hour) these quick moves after long consolidation usually hint at how the market has already priced in all of the upside moves, which was the case this week.