Youtrading UK
Português Español русский
Register Login
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
No Result
View All Result

EURUSD vs USDJPY Forex Analysis

by Neville Hornsey
18 March 2021
in Forex, Insights
0
EURUSD vs USDJPY Forex Analysis
268
SHARES
7.5k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

When thinking about the direction of a certain currency pair there are a few things that I consider. 1) Interest rate differential, 2) Current market theme, 3) Momentum.

If we look at the charts of some of the major currencies, we can see that there have been some distinct momentum changes this last 18 months as a macro theme and new data come into the market making traders, investors, and central banks reprice the currencies.

When viewing the FX majors from April 2018 until April 2020, the majority of the US dollar major pairs directional biases has been for the US dollar to strengthen. For a long time, the US Fed Rates have been positive and higher than most countries, so the flows into the US dollar could be traders looking for yield through carry trades. A carry trade is one based on borrowing in a low-interest rate currency and converting the borrowed amount into a currency with a higher interest rate. There was also a period of political stability in the USA whereas the likes of the UK had major uncertainty around the Brexit decision and outcome, and where there is uncertainty there are usually outflowing towards stability.

Then we had the coronavirus pandemic and all of the macro themes pivoted towards that and the response from the Central banks, governments, and global populations. As the markets crashed the Fed stepped in and changed their monetary policy to be even more accommodative and injected trillions of dollars into the banking system, and overall weakened the US dollar. For the following 8 months, the theme was for the major forex pairs to rise against the greenback.

The European Central Bank (ECB) has not changed its rate since October 2016, and it remains at 0.00% whereas the Bank of Japan has held its -0.100% rate since January 2016. Since the start of 2021, the EURUSD and USDJPY have dislocated themselves from most of the other major pairs back into the old trend of a strengthening US dollar, going back to the carry trade in rate differentials.

We now have new macro themes of rising inflation expectations and yield curves steepening. There are also coronavirus vaccination differentials between Europe, the UK, and the USA. The vaccination rollouts are having a positive effect, so at some point, I am going to make an assumption that covid-19 becomes less of consideration into monetary themes, in the same way as we do not consider the Flu until we catch it. But if we follow the monetary policy theme, nothing has really changed, and central bankers are following a similar path since April 2020. My hypothesis is based on the unwinding of the 2021 effect on the EURUSD and USDJPY and as trade, I had been interested in shorting the USDJPY and going long the EURUSD. However, that doubles up the short US dollar exposure, so the risk would have to be adjusted by at least half for each trade.

See real-time quotes provided by our partner.

See real-time quotes provided by our partner.

The USDJPY is up at multiyear resistance on the weekly chart and the 109 area is proving to be quite a solid price ceiling. While the EURUSD weekly chart shows the single currency is set on an area of balance from the Autumn of 2020, which is looking like it wants to hold as a decent support.

See real-time quotes provided by our partner.

The EURUSD H1 chart shows the response to the FOMC rate hold decision, as the EURUSD popped 80 pips breaking a near-term price channel and today has come back down to retest an old swing high. There is a chance that traders test the low of the Fed candle but traders who missed out on the algo move last night, have now had a 50% pullback and may see the 1.1940 to 1.1950 zone as a value area if they believe in the weaker USD thesis. The ActivTrader sentiment tool shows retail traders are around 60% bearish of the EURUSD so not overly committed to the downside but enough for a contrarian to get long. I would consider the long EURUSD trade invalid at a break and retest of the rising trend line which originates at the swing low from March 9th, 2021. This would be an indication that the market does not believe there will be no rate hikes pre-2023 as they would have unwound the reaction to the continued dovish Fed policy.

See real-time quotes provided by our partner.

On the USDJPY H1 chart, the bearish FOMC candle was unwound at the London open today, but the highs were firmly rejected, which to me opens up the chance to trade down to the previous swing low of 108.30 and then maybe get an acceleration lower. Having such a tight range at multi-year resistance does give a trader an excellent place to limit risk as if prices close higher than 109.40-109.50 the short USDJPY trade idea is invalidated immediately.

Tags: BOJCovid-19ECBEURUSDUS DOLLAR INDEXUSDJPY
Previous Post

Strong Data Ahead Of US…It’s Coming!

Next Post

The USD unwinds yesterday’s moves

Next Post
The USD unwinds yesterday’s moves

The USD unwinds yesterday’s moves

Please login to join discussion

CALL US

Categories
  • Commodities
  • Economy
  • Forex
  • Index
  • Insights
  • Markets
  • Opening of the Week
  • Sem categoria
  • Stocks
  • World

Site Map

  • Home
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
Português Español русский

A comprehensive website for traders, both experienced and new! Checkout our content and learn how to invest and speculate in the markets using margin traded products. Our team of educators has extensive experience and is here to help. Enjoy!

Follow us on social media

Risk Warning

All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors, please ensure that you fully understand the risks involved, and seek independent advice if necessary.

All Rights Reserved - YouTrading UK 2020

Privacy Policy and Terms and Conditions
  • Home
  • My Academy
    • Register Now
    • Login
  • Markets
    • Opening of the Week
    • Stocks
    • Commodities
    • Forex
    • Index
  • Charts
  • Economic Calendar
  • Economy
  • World
  • Insights
  • About Us
No Result
View All Result

© 2020 YouTrading UK - Leaders in Trader Training.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
__cfduid1 monthThe cookie is used by cdn services like CloudFare to identify individual clients behind a shared IP address and apply security settings on a per-client basis. It does not correspond to any user ID in the web application and does not store any personally identifiable information.
_wpfuuid11 yearsThis cookie is used by the WPForms WordPress plugin. The cookie is used to allows the paid version of the plugin to connect entries by the same user and is used for some additional features like the Form Abandonment addon.
cf_use_obThis cookie is set by the provider Cloudflare content delivery network. This cookie is used for determining whether it should continue serving "Always Online" until the cookie expires.
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-advertisement1 yearThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
YSCsessionThis cookies is set by Youtube and is used to track the views of embedded videos.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThis cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.
_gid1 dayThis cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
_fbp3 monthsThis cookie is set by Facebook to deliver advertisement when they are on Facebook or a digital platform powered by Facebook advertising after visiting this website.
fr3 monthsThe cookie is set by Facebook to show relevant advertisments to the users and measure and improve the advertisements. The cookie also tracks the behavior of the user across the web on sites that have Facebook pixel or Facebook social plugin.
IDE1 year 24 daysUsed by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
test_cookie15 minutesThis cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysThis cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
_gat_UA-42160853-21 minuteNo description
cf_ob_infoNo description
CONSENT16 years 8 months 3 days 6 hours 2 minutesNo description
SAVE & ACCEPT
Powered by CookieYes Logo