Was the thing that truly moves the market the "surprise"? The reasons why the dollar/yen is volatile

Was the surprise really the force that moved the market? Why the dollar/yen can spike

In the FX market, large price moves occur every time an important economic indicator or central bank announcement is released.

However, when you look at those moves,

“It didn’t move much even though it was expected.”

“It suddenly surged or plunged just because it was slightly different from expectations.”

Have you ever experienced such moments?

In fact, what moves the market the most is

"a surprise"

Here, the surprise means

“results that market participants did not anticipate.”

For example, in the market

“The Fed will likely keep its policy rate unchanged this time as well.”

is the prevailing view.

If it actually stays unchanged, large moves are unlikely because

the result is already priced in the market.

However,

in the statement,

the unexpected content of

“there is no need to hurry to cut rates.”

is indicated, the market reacts rapidly.

Investors begin to weave in a new scenario

that high rates may persist for a longer period.

As a result, dollar buying strengthens and the USD/JPY can rise sharply.

In other words, the market responds to

the deviation from expectations, not the result itself.

This way of thinking is extremely important in the current USD/JPY market as well.

In many events such as US employment data, CPI, FOMC, and the Bank of Japan’s policy meetings, market expectations are formed in advance.

Therefore, merely looking at the actual results is not enough.

“How much did the market’s expectations differ?”

Focusing on that is an essential perspective in fundamental analysis.

Also, when a big surprise occurs, market participants adjust their positions within a short time.

Therefore, a rapid move in one direction is not uncommon.

Even if you start trading after reading the news,

there are many cases where the market has already moved significantly.

In fundamental analysis,

not only the numbers of economic indicators but also

what scenarios the market had anticipated.

And,

whether this result was surprising enough to change that scenario.

Considering these two points is important.

Markets move by forecasting the future.

And the event that dramatically rewrites that future forecast is

the "surprise."

From now on, when watching the USD/JPY market,

don't just look at the results,

also pay attention to the market’s forecast vs. reality.

That small difference can often be the start of a big trend.

In the currency market today as well, many investors trade while being most sensitive to the word “unexpected.”

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