FX Markets Bracing For Major Market Event

FX Markets Bracing For Major Market Event


The foreign exchange markets are brace for impact after OandA announced they will shut-down currency trading on Sunday ahead of the market-moving events while also wanting to complete their business tasks by the book, in which they could even look at solutions such as these Leverate Forex Regulation options or similar from other providers in order to ensure they are within laws and regulations. If you’re wanting to better your understanding how foreign exchange markets work, consider reading articles at websites similar to learn to trade.

With this in mind, it will be interesting to see if these changes have an impact on cryptocurrency trading. Cryptocurrency markets are decentralized, meaning that they are not issued or backed by a central authority such as a government. Instead, they run across a network of computers. However, cryptocurrencies can be bought and sold via exchanges.

Unlike traditional currencies, cryptocurrencies exist only as a shared digital record of ownership, stored on a blockchain. When a user wants to send cryptocurrency units to another user, they send it to a digital wallet owned by that user. The transaction is not considered final until it has been verified and added to the blockchain through a process called mining. This is also how new cryptocurrency tokens are usually created. You can learn more about this process by taking a look at some of the resources on the bitcoin trader website.

Last night we noted that OandA will shut-down trading on Sunday ahead of the market-moving events surrounding the Greek election (as it seems they are unwilling to take the agency risk and potentially counterparty risk on a large gap). Nowhere is this more clearly priced into the market than the short-dated FX option market. EURUSD 1 week implied vol is at its greatest premium to realized vol ahead of this weekend than at any time in the last three-and-a-half years. The last time the level of short-dated vol was near this high (in absolute and relative terms) was December 9th 2011 and EURUSD fell 400 pips in the next few days.

Upper pane is 1 week EURUSD implied vol (black) vs realized vol (orange); middle pane is the spread between the two; lower pane is EURUSD spot. Blue dashed vertical line is the last time we were close to these absolute and relative levels of vol premium…

At 16.5% implied for 1 week vol – this is the highest since before the last Grand Plan in early November and was followed shortly thereafter by global synchronized central bank intervention.

In the meantime, EURUSD has dropped to more than 2 sigma cheap to its swap-spread-implied fair-value (though as we have seen in the late summer and fall of last year this can remain for longer periods) as the ‘chaos’ premium hits the Euro. It will be interesting to see if any independent traders look for the support of a broker like lmfx through this tricky period in the fx market!

Categories: ECONOMY

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