Euro-Yen and Pound-Yen
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  1. #1
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    Default Euro-Yen and Pound-Yen

    Hello,

    I am going short on these two pairs tonight for a few hundreds pips move in the downside.

    Technical reason:
    A weekly candlestick reversal pattern on both pairs, support was also broken giving scope for lower targets.

    On the Cross:
    Decisive break of 1.3030 fib support for EURUSD, and GBPUSD has no significant support until 1.9220/1.9144. Majors look vulnerable for USD acceleration towards 1.2944 for EUR, and 1.9144 for GBP.

    Fundamental reason:
    USD is going to be well supported in near term, following strong jobs data. I think JPY will gain as well. Putting pressure on EURUSD, GBPUSD, and EURJPY, GBPJPY on downside.

    Share your idea, do you agree?

  2. #2
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    Just curious why you would use USD analysis to trade these crosses? It really isn't relevant. After all, the USD isn't part of either pair you are talking about.

    Actually, if the USD were to get in to one of its strong trending spells, the crosses would probably go flat for a while. That tends to happen when everyone gets focused on the Greenback.

    I think the biggest consideration will be the Japanese and what they do or don't do with interest rates. Right now the market seems inclined to expect a hike sometime soon. If that feeling gets shaken, watch the JPY take a hit.

  3. #3
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    The USD and YEN together are important factor for these potential trades.
    Sure, USD is involved.

    Let me ask you, what makes GBPJPY or EURJPY trend upside?
    USDJPY is going up OR GBPUSD / EURUSD rallying to the upside.

    But if JPY will get boost, and USD. (EURUSD, and GBPUSD will drop heavily. Thus, EURJPY and GBPJPY accelerating the downside)... and I estimate that USDJPY won't rally in USD favour, as the market has a good JPY sentiment nowadays, and carry trading is hit.


    So, there is a big, very big correlation between USD trends in majors and Crosses. That's for sure.
    Last edited by topchess; 01-06-2007 at 06:30 AM.

  4. #4
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    Quote Originally Posted by topchess View Post
    Let me ask you, what makes GBPJPY or EURJPY trend upside?
    Very simple. It's the relative value of the JPY vs. the GBP or the EUR. That's what the cross represents, after all. They are not related to the USD.

    Can you see EUR/JPY dropping when USD/JPY drops? Absolutely! It happens when some JPY positive event or news takes place, like traders thinking the BOJ is going to hike rates. That is a JPY specific influence. It has nothing at all to do with the USD. If you see the JPY pairs moving in the same direction, it's because of the JPY. Just like if you see the USD rising or falling against all the other major currencies, it has to do with the USD.

    Quote Originally Posted by topchess View Post
    So, there is a big, very big correlation between USD trends in majors and Crosses. That's for sure.
    Show us the numbers. Run a regression analysis and see what you come up with. You will most certainly find that there is not a "very big correlation".

  5. #5
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    Let us take one pair, say EURJPY.

    EURJPY moves down with EURUSD, or with USDJPY..and vice versa
    I ask you a straightforward question.

    Assume EURUSD drops X pips, and USDJPY is flat or moved up way lower than X pips, where will EURJPY be heading?


    It will be heading down. that's what I mean.
    I can't be convinced that EURJPY will still go up if EURUSD moved down, unless USDJPY is going up (way more than EURUSD drops)

    I even seen case when both EURUSD and USDJPY (nowadays) drop together. that's like a double drop for EURJPY.

    So based on my estimations, JPY will be supported in near term, suggesting that USDJPY will be flat or sideways/lower until rate decision, while EURUSD looks vulnerable to accelerate downside, that means EURJPY will be at 153-152 soon.

  6. #6
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    Quote Originally Posted by topchess View Post
    Let us take one pair, say EURJPY.

    EURJPY moves down with EURUSD, or with USDJPY..and vice versa
    I ask you a straightforward question.

    Assume EURUSD drops X pips, and USDJPY is flat or moved up way lower than X pips, where will EURJPY be heading?

    It will be heading down. that's what I mean.
    In the case where EUR/USD falls and USD/JPY stays flat (or only rises a little), then that just indicates EUR weakness. Yes, you would expect EUR/JPY to fall because the EUR is weaker and JPY is holding steady.

    You write, though, as if EUR/JPY is just a mathematical construct based on EUR/USD and USD/JPY and not actual exchange rate with which actual cross-border transactions take place. In fact, sometimes EUR/JPY is the driver of changes in EUR/USD and/or USD/JPY, rather than it being the other way around.

    Quote Originally Posted by topchess View Post
    I can't be convinced that EURJPY will still go up if EURUSD moved down, unless USDJPY is going up (way more than EURUSD drops)

    I even seen case when both EURUSD and USDJPY (nowadays) drop together. that's like a double drop for EURJPY.
    You just hit the nail exactly on the head in terms of the point that I'm making. EUR/JPY is the rate of exchange between the EUR and the JPY. EUR/JPY can and does sometimes move higher when EUR/USD drops because while the EUR may be weakening against the USD, it is rising in relative value against the JPY. Similarly, EUR/JPY can sometimes fall even when EUR/USD is moving higher because at the same time the JPY is also rising in value.

    What you seem to be doing is performing double analysis - one of EUR/USD and one of USD/JPY. That is totally fine. I do that myself sometimes. My point is that EUR/JPY is a rate unto itself and must be treated as such.

  7. #7
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    Yes, that's what I was talking about.

    I tried to make my analysis for EURJPY based on how EURUSD and USDJPY will be performing in near term.

    I know that EURJPY already has its own personality and analysis, but sometimes I am confused with cross analysis, so I refer to majors. That takes more time in fact.

    But I've seen many times EURJPY leading moves in majors, so you are right. but the point, I can't estimate cross pairs that well, so I take majors trends as direction (possible direction for crosses).

    Ofcourse, I will put USDJPY in mind as well as EURUSD to estimate EURJPY moves.

    You write, though, as if EUR/JPY is just a mathematical construct based on EUR/USD and USD/JPY and not actual exchange rate with which actual cross-border transactions take place. In fact, sometimes EUR/JPY is the driver of changes in EUR/USD and/or USD/JPY, rather than it being the other way around.
    My point is that EUR/JPY is a rate unto itself and must be treated as such.
    Your points are right, and I totally agree. I already explained why I would use majors analysis to trade cross pairs. Though, that seems wrong, but until I master cross pair own personality/analysis.

    Afterall, Crosses are complicated for me.

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