Golden Week in Japan and the thin yen weeks

[Fairman]

Golden Week in Japan and the thin yen weeks

Late April into early May, Japan has a cluster of public holidays known as Golden Week. Tokyo desks thin out, and a lot of Japanese retail traders, who are a big part of the yen market, are off or trading less.

What it does to USDJPY and the yen crosses isn't one thing. Some days are very quiet in the Asia session and you just get drift. Other days, lower liquidity means a modest flow moves price further than usual, and you get the odd sharp spike in hours that are normally calm. There have been some notable yen moves in that window over the years, which people still bring up.

I treat it like any holiday period, only more so for JPY. Smaller size in the Asian session, stops placed with more room, no assumption that the Tokyo range will behave the way it normally does. If I'm trading London, yen pairs are less affected by then, but I still watch for spillover.

The New Year holidays and the Obon period in August are similar in spirit, though less concentrated.

None of this is a trade idea. It's a reason not to trust your normal Asia session habits for those few days, and to check exact holiday dates each year since they shift around weekends.

[Fairman]

Japanese authorities have stepped into the yen market at times when it was moving fast, and thin holiday liquidity doesn't stop that from happening. If USDJPY is already near levels where people are talking about intervention, I'd be extra careful in a holiday week, because any move gets bigger when there's less on the other side. I don't try to guess intervention. I just don't want to be in a tight scalp when one might land. Being flat or small during those days costs very little. Being caught in a big move with a tight stop and a wide spread can cost a lot, and that's the trade I'm trying to avoid.

[Fairman]

Spreads are the practical part for me. My broker's USDJPY spread in the Asian session during Golden Week tends to sit wider than normal, though it's still tight compared with the crosses. GBPJPY and EURJPY are where it gets uncomfortable. If you scalp the crosses in Asia, I'd check the spread on the first holiday morning before doing anything, and decide from that whether the week's worth trading at all on those pairs. On some brokers the cross spreads stay wide all morning, not just at the open. If that's the case, the trades just don't add up for small targets, and I'd rather do something else with the time.