Forex Volatility Spikes: Trading the Central Bank Pivots

Forex markets stay quiet for years, then explode. We are in the explosion. The cause? Policy Divergence.

The Landscape

• USA (Fed): Pivoting to cuts to save the housing market. (Weakens USD)
• Japan (BOJ): Finally raising rates after decades of ZIRP. (Strengthens JPY)
• Europe (ECB): Stuck in the middle, battling stagflation.

The Trade: USD/JPY Carry Unwind

The "Carry Trade" (borrowing cheap Yen to buy Yielding Dollars) is unwinding. This creates massive volatility in USD/JPY.

• Strategy: Momentum Bots thrive here.
• Risk: Sharp reversals. Stop Losses must be wide enough to breathe but tight enough to protect.

Crypto Spillover

Forex volatility often spills into crypto. A crashing USD usually lights a fire under Bitcoin. Watch the DXY chart as closely as you watch BTC.