To understand EUR/USD and the USD/JPY relationship is to first understand USD/JPY is actually EUR/USD. USD/JPY is the exact same pair as EUR/USD, no difference exist except for the slight built in deviation that exist when USD is thrown into the mix. EUR/USD at 1.07 and USD/JPY at 1.11 allow both pairs to view as the same pair. Its why EUR/JPY is so vital to currency markets as a risk barometer.
Never ever look to USD/JPY for USD direction cause it won’t ever be found. USD/CHF is the best pair because it was directly designed from DXY. Any writers or analysts that look for USD direction from USD/JPY knows not what they say or write. If analysts write about USD/JPY and yields, stock markets or even commodoties as the driver to USD/JPY is so far off the mark, its not worth a comment. USD/JPY and JPY/USD correlate to the Nikkei 50% and less when viewed from the S&P’s. Usually the 5 and/or 7 year USD yields drive USD/JPY. To trade USD/JPY in a significant news event is never recommended because it always under performs.
Japanese Call Rates trade at premium 1.074 V European Eonia at 0.759. The top of the USD/JPY channel is then found at 126.61 which is fairly consistent with the 7 and 10 year regression data.
EUR/USD V USD/JPY from EUR/USD 1.0736, means, high and low ranges offered
1 year mean 122.10, high 123.86, low 120.33
2 year mean 123.85, high 126.32, low 121.37
3 year mean 123.85, high 128.64, low 119.05
5 year mean 120.93, high 132.51, low 109.34
7 year mean 116.80, high 127.66, low 105.93
10 year mean 112.70, high 126.72, low 98.67
USD/JPY V EUR/USD from USD/JPY 119.05
1 year mean 1.1076, high 1.1325, low 1.0827
2 year mean 1.1394, high 1.1727, low 1.1061
3 year mean 1.1917, high 1.2416, low 1.1418
5 year mean 1.2476, high 1.3209, low 1.1743
7 year mean 1.1519, high 1.2286, low 1.0752
10 year mean 1.2233, high 1.3240, low 1.1226
Brian Twomey Inside the Currency Market, btwomey.com