Brian Twomey
Brian's Investment
The definition of a cross pair is the creation by two separate currency pairs with USD and Non-USD employed as the basis to calculate. The term is triangulation and done through the various legs. What is created is a cross pair. A cross pair triangulation and creation of a currency pair is the opposite to a synthetic currency.
A synthetic currency is created by pairing a convertible currency to a blocked currency. A blocked currency lacks ability to freely trade and trades on the black market. Argentina ARS and other South and Central American nations are prime examples. The last manner to create a synthetic currency is to match a currency pair to a Non-Deliverable Forward. Many nations Forwards are non-Deliverable. Prime examples include Brazil, South Africa, South Korea, Israel. The key is to match the spot equivalent currency to the NDF to lock in a price on X date and to guard against volatility.
A few examples to triangulate cross pairs include JPY. EUR/JPY is created by EUR/USD X USD/JPY. GBP/JPY is created by GBP/USD X USD/JPY. NZD/JPY is created by NZD/USD X USD/JPY.
CHF/JPY is created by USD/JPY Divided by USD/CHF. CAD/JPY is created by USD/JPY divided by USD/CAD.
GBP/NZD is created by GBP/USD divided by NZD/USD. GBP/CAD is created by GBP/USD X USD/CAD. AUD/EUR is created by dividing AUD/USD by EUR/USD. EUR/GBP is created by EUR/USD divide by GBP/USD. AUD/NZD is created by AUD/USD divided by NZD/USD.
A pair like MXN/RUB triangulates as USD/RUB divide USD/MXN but sometimes must factor USD/MXN, EUR/RUB and EUR/USD. Depends on the time of day, liquidity and spreads. When those markets are open and traded, spreads are low but widen significantly upon market closes. Both RUB and MXN are oil producer currencies however RUB tracks Brent while MXN follows WTI. Both respond to Brent/ WTI spreads. OPEC influences more Brent than WTI. Overall 70% MXN exports travel to the United States therefore MXN is most sensitive to DXY.
Cross pairs move more than underlying USD and Non but are never as liquid. Liquidity depends on USD V Non-USD for cross pair movement because those pairs are most liquid.
One factor influences RUB is the CBR cut its USD reserves below Euro for the first time since 2008. USD reserves since Jan 1 was 39.6% from 44.8% in 2015. Euro current is 46.1% V 41.5%.
The general rule for cross pair triangulation is if USD is the base for both currency pairs then divide to obtain the cross pair price. If USD is located in the quote position then divide, otherwise multiply. Basic formula is A/B X B/C = CB. Cross rates equal the ratio of the two corresponding pairs.
Trading currencies and other financial instruments carries a degree of loss and possible loss of entire investments. Please managed your own risks, stop loss, and margins requirements.
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
USD/JPY hovers near 154.00, reverses Tokyo CPI-led slide
USD/JPY is consolidating its rebound near 154.00, having reversed the Tokyo CPI data-led slide to 153.40. The pair stays volatile, as the BoJ-Fed policy divergence remains in play while markets reposition ahead of the top-tier US PCE inflation data due later on Friday.
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.
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