EUR, JPY and Realignment

Brian Twomey Brian's Investment

EUR/USD is below its 10 year average at 1.2905, EUR/JPY is above its 10 year average at 126.71 while USD/JPY is also above its 10 year average at 98.91. USD/CAD is above at 1.1226 and slacker currency USD/CHF is above its 10 year by 35 pips at 0.9829. DXY is above its 10 year at 85.28.

The overall Realignment from 2008 remains in place as markets switched from risk on to risk off. From 1998 to 2008, EUR/USD and EUR/JPY were married in longs and shorts and USD/JPY was left on its own.

The crash hit and switch hitter EUR/JPY married USD/JPY and EUR/USD became left on its own. The 10 year average was the demarcation line then but its questionable if the 10 year still plays its vital role today. However the 10 year is traditional in prior periods. This same outline was seen only in reverse to today from 1998 to 2008. Risk on, risk off means the markets in the larger picture must favor USD or EUR and EUR/JPY decides. USD is most dominant today.

When USD is favored as dominant market structure, Volatility is low because built in parameters in USD are severely compressed. When EUR is favored as dominant, volatility explodes because EUR and Dem before is traditionally a high volatility currency pair.

When EUR/USD is married to EUR/JPY, it adds to high volatility. Volatility is defined as wide ranges. Note the 16 DXY Vs EUR/USD articles. EUR/USD ranges were favored from 600 and 500 monthly pips to DXY 200 and 300. Times this by 12 months or 10 years.

The larger scale new Realignment switches when EUR/USD breaks above 1.29, USD/JPY breaks below 98 and EUR/JPY remains above 126. Now its risk on and high volatility. But the 14 year average at 1.2848 is in the way of 1.2900. Correct positioning in currency markets are EUR/USD and EUR/JPY married and USD/JPY on its own.

Currency markets are in the 9th year of the current realignment and a switch is due as durations generally run roughly 10 years. Its also the 4th quadrant which means the new period, the new Realignment is upon us. It also means real trends, easily seen as well as good economic times are also upon us. A real trend means monthly or yearly trends are available positions while today lacks availability.

4th Quadrants as current period are nasty times for markets, trends and economic prosperity. This changes when 1st Quadrant and Realignment hits. Quadrants are traditional and dates to 1694 and the BOE as 1st central bank. Means Quanrants never fail. 2008 was seen from miles away.

Current period and Alignment informs EUR/USD is on a massive correction. From 1.0300's to current 1.1800's is 1500 pips. Allowable range in current period is right at 2500 pips in longs or shorts, 1/2 = 1200. Coincides to 12 1/2 Quadrant years. The next big line break is the 5 year average at current 1.2032. At 1.2032 is 1700 pips. If the current period holds and I see it will then EUR is ready for a big correction lower. See USD/JPY V EUR/USD and its informs if this is correct.

EUR/USD. Brick wall today is 1.1839 and 1.1851. Overall break points today are 1.1794 and 1.1631. Shorts must break 1.1806 then comes 1.1778, 1.1761 and 1.1747.

EUR/JPY. Higher for EUR/JPY must break 133.54 then on to 134.29 and 134.34. Below 133.54 then comes 133.29 and 133.06.

USD/JPY. Overall break points are here at 112.64 and 111.48. Higher today, USD/JPY must break 112.96 then 113.25. Lower break points are 112.68, 112.64 and 112.61. Solid here. Lowest today is 112.54 on a 112.61 break.

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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