Hi guys and gals,

Can speculation move a cross? Or is the movement of a cross only the product of the two majors that make up that cross? Or is it a little of both? And if speculation can move a cross, can the speculation of that cross move the majors of that cross?

I am not really looking for a hard answer. I am just bringing up some talking points for any that is interested. Of course, if you do have hard answers to the questions above, please post.

First, by definition if a cross moves at least one of the other two legs of the triangle of rates (for example: USD/JPY, EUR/JPY, EUR/USD) must move.

Second, trade in a cross can absolutely move the cross. Crosses trade directly just as the non-cross pairs do. They are not just “derivatives”. The action in the carry trade pairs demonstrated that quite clearly last year.

Thanks John… I think your answer explained it perfectly.

So a synthetic pair is not just a derivative but a major influence on the other two pairs involved that make the complete triangle.

I wouldn’t call crosses “synthetic” since you can trade them outright - at least the major ones. When you get into more exotic pairs (like CHF/MXN) you may have to create synthetic crosses by trading to the two legs.

As for “derivative”, you could quite reasonably make the argument that all three parts of a the triangle are derivative since a change in any one of them can alter the others.