GBP flash crashed; forex market instability worsening

GBP pairs flash crashed this morning without apparent trigger. Several pairs set new high/low for the year. Some fear that brokers may not honour trades.

 

Fat-finger or news?

GBP pairs flashed crashed earlier this morning. It is uncertain if the flash crash was triggered by ‘fat finger’ since it does not appear to be news related.

In one 5-minute bar, EURGBP was up 440 pips. GBPJPY was done 835 pips in the same duration. EURGBP set new high for the year at 0.92779. GBPJPY set new low at 122.718. Markets have since recovered more than half of flash losses.

EURGBP and GBPJPY 5-minute charts showing GBP flash crash

EURGBP and GBPJPY 5-minute charts showing GBP flash crash

There is some talk that brokers might not honour trades done during this time; there was advice to retail forex traders to do screen captures of their trades to retain proof.

 

Worrying signs such shocks are stacking up in short time

All these are worrying signs of instability. Consider the damage caused 15 January last year by a flash crash of CHF pairs due to Swiss National Bank’s decision to de-peg the EURCHF. The crash caused several branded forex brokers to become insolvent. In addition consider these market shaking events:

  1. March 15 2015 FOMC decision not to hike rates despite wide belief caused EURUSD to spike 400 plus pips in 3 hours.
  2. August 11 2015 PBOC’s shock decision to devalue the Yuan caused USDCNH to spike 1600 pips in 5 hours.
  3. Currencies, stock market flash crash with US stock indices limit down on ‘Black Monday’ 24 August 2015.
  4. China stock market indices limit down on January 04 this year leading to worldwide contagion.
  5. ‘Unexpected’ Brexit vote throws GBP into chaos, with GBPJPY down 15% in a day.

 

Potential levels to look at for GBPUSD, GBPSGD

Coincidentally, local paper Shin Min Daily interviewed Chief Trainer Binni Ong on 04 October. Binni believes that if GBPUSD could not maintain 1.28, it could go to parity or even 0.95.  In addition, she observes that there are no signs of rebound in the GBPSGD. 1.7 is a technical support which broken could lead to more GBP losses.

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Shin Min Daily 新明日报 interviewed Chief Trainer

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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