Inside the Currency Market: EUR/USD,USD/JPY, Yen Cross Transitions
To understand the EUR/USD, USD/JPY and EUR/JPY relationship is not to view EUR/USD and USD/JPY alone since what we see is a very tight relationship and this alignment is forcing short ranges. Viewed longer term, EUR/USD and USD/JPY hardly share a relationship, it exists literally without a pulse. Reason for this is USD/JPY lies literally a few pips below the EUR/USD line and EUR/JPY lies just a few pips above the EUR/USD line.
The problem relationship in this trifecta is USD/JPY is light years overbought Vs EUR/JPY and EUR/USD is oversold vs EUR/JPY. Worse, EUR/USD is overbought vs USD/JPY.
EUR/JPY Vs USD/JPY must be viewed to understand EUR/JPY is the problem pair that is holding up further price movements in USD/JPY and EUR/USD. Current EUR/JPY and USD/JPY prices are at their greatest points in the last 6 1/2 years.
EUR/JPY just broke vital 132.63 and places EUR/JPY in neutrality between 132.63 – 130.16. EUR/JPY doesn’t know exactly where to go so short ranges between EUR/USD and USD/JPY are forcing its location to neutrality.
Viewed from further JPY crosses, CAD/JPY from current 92.20 must break 92.09 to see neutrality between 92.09 – 88.98. GBP/JPY must break 175.39 to see neutrality between 175.39 – 170.37.
The major pairs are late to the JPY neutrality game. The following are in neutral arranged as IDR/JPY, NOK/JPY, PLN, SEK, TRY, ZAR, CZK. Even Denmark earned neutrality and HUF/JPY and BRL are only 100 pips away.
Prices and pairs are formally Realigning but it appears transitions must occur to neutrality first.
EUR/USD. The bottom as viewed from USD/CHF previously and now confirmed by USD/JPY and EUR/JPY remains at 1.10. This point is a big break if EUR/USD plans travels down further.
Breaks below: 1.1206, 1.1172, 1.1140, 1.10. Above: 1.1312, 1.1353, 1.1372. EUR/USD is currently severely oversold.
USD/JPY Big point break below 115.54 and 115.86. USD/JPY longs are not terrible. Its shorter term that’s a bit overbought but longer term, USD/JPY has easy potential to go higher.
Levels Below: 117.36 and 117.32 are very important points, breaks lower would see deeper correction to next 116.29, 115.86, 115.54.
Above : 117.72, 117.87, 118.23, 118.44, 119.10, 119.44, 119.52, 120.09.
EUR/JPY. The impetus for current move to 132 was the break at 137.62 and 137.95. Both are big lines and must hold any further EUR/JPY shorts. USD/JPY will be responsible to drive further EUR/JPY prices. In order for EUR/USD to again own this pair fully may take a break of 1.10 or possibly USD/JPY 120.09. EUR/JPY is expected to see a big move as all EUR/USD crosses.
Levels Above: 132.63, 132.78, 132.81, 133.65, 134.31
Below: 131.69, 131.32, 130.05
More pairs, trades, Info posted here throughout week
Brian Twomey, Inside the Currency Market, btwomey.com