Currency market: EUR/JPY vs USD/CAD levels and correlations

Brian Twomey Brian's Investment

The most versatile currency pair in the 28 currency lineup is USD/CAD. USD/CAD is the exact opposite pair to GBP/USD, opposite pair to CAD/CHF, opposite pair to EUR/USD, and total opposite pair to EUR/JPY.

A USD/CAD trade runs exact opposite to above pairs and its built into the system of exchange rates by correlations. USD/CAD Vs EUR/JPY runs -98% and -88% to EUR/USD. GBP/USD V USD/CAD normally runs a consistent -90% correlations.

While current USD/CAD and GBP/USD spreads run a fairly normal 500 ish pips, long-term trades are evaluated when spreads run 800, 1000 and 1200 to 1500's. Spreads compress and contract, compress and contract over time. Short term, EUR/JPY is the best trade evaluator to USD/CAD. Spreads currently run about an extremely small 200 ish pips.

Short spreads warn to a big move ahead but also to monitor trades for exchange rate cross overs. Current EUR/JPY trades above USD/CAD. If EUR/JPY trades below USD/CAD then short EUR/JPY at the same time to long USD/CAD. Current USD/CAD is overbought to oversold EUR/JPY therefore EUR/JPY above USD/CAD is correct to alignment.

In the past 5 trade days, USD/CAD achieved lows at 1.2600's while EUR/JPY traded to 129.00's. The cross-over occurred around 128.00's. Current 200 pips spread to USD/CAD and EUR/JPY is the result to association of proximity to vital points.

USD/CAD higher must break 1.2828, 1.2844 and 1.2886 to target 1.2934 and 1.2960 then the big break at the 5 year average at 1.3039. USD/CAD below 1.2828 targets 1.2615 and 1.2611 then 1.2552 and 1.2355.

EUR/JPY supports are located at 127.41, 127.05 and 126.33.

EUR/JPY targets above 127.41 first 128.79, 129.27 and 129.56. Below 127.05 targets 126.33 then the 5 year average at 126.06.

Day trades contain longs and shorts per currency pair for multiple pips.

USD/CAD 5 vital numbers for today are located at 1.2732, 1.2745, 1.2758, 1.2829 and 1.2862.

EUR/JPY 5 vital numbers are located at 127.36, 127.47, 127.61, 128.31 and 128.63.

Note the exchange rate numbers are the exact same so entries and exits are the exact same except in the opposite direction.

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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