Currency Market Realignment EUR/USD V EUR/JPY V USD/JPY Normal currency market alignment exists when most widely traded EUR/USD and USD/JPY trade above and below market barometer, 10Y AVGS.
EUR/JPY is the outlier and currently trades above its 10Y at 124.62. EUR/JPY and USD/JPY then share positive correlations in risk off, USD favored markets while EUR/USD as the lone wolf trades below its 10Y at 1.2662 and negative correlates.
The lone wolf EUR/USD is always sold and long USD/JPY and EUR/JPY. Alignments and Realignments are periodic and last for years. We’re in 4th and last Quadrant to 50 year Free Float. Rarely seen Realignment occurs when EUR/JPY breaks below 10Y at 124.42, reattaches to its rightful position to correlate positive to EUR/USD and both begin a long multi year journey upward to trade above both its 10 year averages in risk on, USD negative markets.
USD/JPY becomes the lone wolf, loses EUR/JPY positive correlations to go negative and begins the long journey down to break its 10 year Avg at current 99.16. Alignment/ Realignments are wholesale market shifts, complete role reversals to currency pair positions and takes about 1Y to fully complete. 1998 and 2008 were last true alignments to understand time contexts to changes an rare events. my Paper stats, pics
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