EUR/JPY, USD/JPY, EUR/USD
Among the 3 most widely traded pairs by market share and dollar amounts, EUR/JPY is the pair that must get going to see further EUR/USD downsides. EUR/USD bounces the last 2 Sunday market opens was attributable to EUR/JPY due to its position as overall market leader. Current EUR/JPY Correlations Vs EUR/USD sits at 0.4 and 0.31 Vs USD/JPY based on a quick snap shot of current market prices. 3 weeks ago, EUR/JPY was at its most crucial point as it correlated with EUR/USD at 0.10. That was the lowest EUR/JPY correlation seen in 5 weeks but EUR/JPY wasn’t ready to make the formal break. Correlations are low and oversold but EUR/JPY oversold condition matches well with current oversold positions in terms of its averages. In terms of overrall currency market prices, the market is well balanced with a slight bias to the downside. What balanced market prices vs oversold condition means is EUR/JPY is in a crucial do or die position. Market prices and posiions can’t live in a shared Correlation environment forever as was seen over the past 5 weeks and its also why EUR/JPY prices meandered in 200 pips ranges. EUR/JPY must inform how the next market period will trade and if EUR/USD will see its lows and USD/JPY its highs. Without a break, prices meander again.
EUR/JPY must break 133.82 to see further down moves. A break lower targets 132.52. Longs must break 136.82 above. Price now ranges between 133.82 – 136.82.
USD/JPY is held below by strong support at 121.94 and 121.38. Both points are oversold. USD/JPY has every ability to fly higher. Buy dips.
EUR/USD must see a break of 1.1024 and 1.1003 to see shorts get moving. Targets then become 1.0987, 1.0931, 1.0926 and 1.0870. Above points 1.1036, 1.1038. Monster Resistance lies at 1.1170, 1.1150, 1.1141. To see higher, a break must be seen at 1.1168. Strategy is sell rallies as is the EUR/JPY way.
Brian Twomey Inside the Currency Market, btwomey.com