Definition – What does Coiled Market mean?
A coiled market is a market that has the potential to make a strong move in one direction after it has been pushed in the opposite direction or held flat. A coiled market is believed to be artificially forced in the opposite direction to the movement predicted by its fundamentals and will consequently bounce back when the artificial constraints are removed. The bounce is usually greater than the original movement would have been if there were no interference.
ForexTerms explains Coiled Market
The Yuan is a good example of a potentially coiled market because many forex traders think it is being kept extremely low by the Chinese government compared to its fair market values. Should the government controls be completely lifted, the Yuan would likely see a rapid rise in value. The rebound on a coiled market isn’t always in an upward direction, however. The market for the pound became coiled in the other direction leading up to Black Wednesday, and the rebound off that coiled market made George Soros a billionaire.