Currency market: Correlations and EUR/USD, GBP/USD, GBP/JPY, USD/JPY

Brian Twomey Brian's Investment

DXY big line break is located at 95.25. Current range above trades from 95.25 to 97.16. Below 95.25 then range becomes 95.25 -94.70, 93.71 and 92.33. DXY 95.25 coincides to EUR/USD at 1.1498, GBP/USD at 1.3106 and USD/CAD at 1.3039.

GBP/JPY correlates to GBP/USD at +23% and USD/JPY at +10%. GBP/JPY for this trade week became completely lost to correlations. Under such danger to lost correlational situations, short is the only direction. Short from lost correlations is common practice to a currency price and standard over many years. Its the standard for many years to come as a trade practice.

Last week GBP/USD correlated to GBP/JPY at -52% and +71% to USD/JPY. The correlational adjustment was a radical change as correlations normally hold for at least 1 month. What changes correlation is significant breaks at respective levels by either GBP/USD or USD/JPY.

In this instance, anchor pairs drive cross pair GBP/JPY.

GBP/USD trades fairly normal within its bounds while USD/JPY is off kilter should trade to at least 110.00's. USD/JPY is the problem to correlations.

A move is required by either GBP/USD or USD/JPY in order for GBP/JPY to re correlate and find its home to either GBP/USD or USD/JPY.

GBP/JPY short point was 151.31 but 151.31 and deeply oversold stood just ahead of big line breaks at 150.90 and 150.22. Next big break lower is located at 148.13. The weekly target at 152.86 stands and just prior to next vital point at current 153.07. GBP/JPY under correlational problems means 153.07 should hold unless a bonbshell hits the markets.

GBP/JPY traded lower this week based on correlational problems yet shorts were impossible due from not only oversold but from 150.90 and 150.22. Correct is long only when GBP/JPY achieves bottoms.

GBP/JPY and GBP/USD 50 day average is located 154.68 and 1.3572.

USD/JPY and GBP/JPY 50 day averages are located at 113.97 and 154.68. USD/JPY break at 113.97 targets the 100 day at 112.18, then 200 day at 111.05 and 253 at 110.65. USD/JPY's direction is lower as short only.

View central bank Red books for trade methodologies and found is all trade by moving averages. But averages must align correctly. Chart averages are off by many miles.

GBP/USD

Big breaks for higher are located at 1.3379 and 1.3461. No significant change from last week however averages are rising to allow a wider trade range. Bottom long points are found at 1.3338, 1.3229 and 1.3119 just ahead of 1.3105 at the 5 year average. Long only is the strategy as GBP/USD's price sits on the floor.

EUR/USD

Targets written last week remain at 1.1440, 1.1456 and 1.1475 just head of 1.1498. If DXY breaks below 95.25 then EUR/USD breaks above 1.1498 to 1.1511 then 1.1587 and 1.1606.

Author

Brian Twomey

Brian's Investment

Brian Twomey is an independent trader and a prolific writer on trading, having authored over sixty articles in Technical Analysis of Stocks & Commodities and Investopedia.

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