Thread: why did EUR/JPY drop during NFP?

Originally Posted by ;

I noticed today that ALL Yen pairs dropped ( a bit hard )....aud/jpy, cad/jpy, nzd/jpy etc.....

Any thoughts as to why those pairs weakening, on poor US news?

Along with poor US news(NFP), how should I sayit appeared to have involved many stop-losses, reduction cuts or margin calls.
Unfortunately, some Japanese investors mean to try their luck at an online Currency Market broker by high-leveraged effectiveness as though they played pachinko(means pinball machine/one of popular Japan's public gambling establishments) or as when they tried their luck at the slot machines...('A')
According to one estimate, the total number of individual accounts in Western Currency Market brokers appears to be roughly one million accounts in Japan.

Originally Posted by ;

A weak dollar reinforces the Yen on Yen pairs. You will observe that the GBP/JPY fell also. A weak jobs number speaking, makes US consumers have money to spend and therefore reduces the quantity of exports from Japan. Japan's economy depends greatly on a robust export industry.

??? If Japan's economy is weakening, as far as I understand the value of Yen should drop rather of rise...

Originally Posted by ;

You are registered here because Feb 2006, did you make any trades because you just like to observe the forum?

USD/JPY rules the others JPY pairs, and this is the actual reason why!

When USD/JPY drops, the least it could happen is the other pairs fall just a little bit slower due to the support of the other pairs like EU and GU pushing up in this case.

But its all about the number...


If you notice... the pips of EU or GU are below 1 thousandth of 1

Instance 0.0001

The pips on UJ are in on hundredth of 1....

Example 0.01

a couple notice this, but its important....

What this means is that UJ pips are far more stronger than the others despite we make almost the exact same.

Considering EJ = EU * UJ.... This 0.01 * 0.0001 will have a impact on the final number. 0.01 will rule as it is a larger number.

Be well!

Sorry I've contributed so little as my joining the forum...

at 1st I invested most of my time developing mechanical trading systems, unfortunately I could not bring myself to trust some of those systems I've developed.

Then I began following other people's systems, unfortunately that also failed to bear fruits.

Only lately have I began to do some real trading and collecting experiences. I expect I can cure this later on as you can see that I really don't have a lot to share yet.

The limitation of my understanding prevents me from understanding your article. As far as I am aware, 1 pip of USD/JPY worthes about $8 if you trade with 1 normal lot, while at the exact same time 1 pip of EUR/USD or GBP/USD worthes $10. So I am not sure that UJ pips are far more powerful than others. Anyhow, what do you mean by more powerful? Besides, does this really matter?

My simple ans is very easy and clear


Q:Went they market Usd which you do they buy? .... yen? gbp? chf? cad?

Money is in the market depended upon where they is... currency? stock? oil? gold? Or in the bank?

The USDX fell. USDJPY is a part of the USDX basket. USDJPY fell than EURUSD climbed. EJ drops.

It used to be: weak USD solid stocks = rising carry trade (strong majors exotics a JPY that is weaker than even the USD).


FA:
From the big unwind it seemed buying USD for risk aversion was the reason the majors fell together with the carry pairs and exotics.

Now the USD appears to be wobbly as a result of recession and rate reduction risks and stock markets dip because they're all proxies of the DJI =gt; europe back in drama (anti-USD), but shunning carry.

TA:
There was a bounce from a technically significant USDX level at 80 that culminated in 3 waves of ABC that subsequently showed in a correction in EURUSD(and others), albeit a bit exaggerated.
Following this the next spontaneous wave / a trend continuation took place as USDX hit some fibs / MAs / s/r, and lost a trendline and the surge on Friday happened.

Whatever else happened in the actual world was of no matter to the chart.


I much prefer the chart.


At the end it doesn't matter why as long as you understand ahead of time what the chart is saying where matters goes. When a TL breaks, if a 10 touch s/r goes, if levels go, it's pretty much irrelevant what the reason isthat reality is - it's going.

But it's amusing that there is always the need for an external reason, also.

(I wonder myself as well a lot, which makes it even more peculiar. Seems we always Require a reason other than what the chart states )

Originally Posted by ;

Sorry, if or not a pip is 0.01 or 0.0001 does not make any difference .

The main reason is that bad NFP numbers showed that US market is weak, and the stockmarkets fell around the world. EUR/JPY is a carry trade pair, and carry trades are generally strongly correlated with stock markets. So EUR/JPY and GBP/JPY both fell strongly after NFP.

It appears that carry trades are utilized not just for profiting from the interest rate differential between high and low yielding currencies, but also yen are borrowed, and converted to EUR or GBP to buy inventory. So when is a sell-off in the stock market, the yen is bought back, hence the strengthening.

Wow, I believe that lights a bulb for me! Thank you Sgrig! I've encountered the word carry trades before, but deemed it irrelevant as I am a chart trader and thought that price tells everything. I can not place my finger on it however personally, although I somehow feel that your response here is very important to me.

So bad NFP induces US stock market to fall. The market is considered weak. Investments fled the country, no one wants dollars any more. The value of Yen, Euro and GBP raises against the dollar. Which explains why USD/JPY fell while at precisely the same period GBP/USD and EUR/USD rose. Also fell, but it doesn't clarify.

When US stock markets fell, does it necessarily mean that Europe and Asian stock markets may even fall?

If people have been borrowing euro to buy euporean stocks, then logically EUR/JPY will fall when european stock markets fell. But the question is, why would they wish to do that in the first place?

When european stock markets fell due to the close economic relationship between europe and USA, then japanese stock market could also fall due to its close economic relationship with the USA. When both markets fell, why were people buy their paychecks back in a rush, rather than buying back their euros or GBPs?

Originally Posted by ;

The USDX fell. USDJPY is a part of the USDX basket. USDJPY fell than EURUSD rose. Therefore, EJ drops.

It used to be: weak USD strong stocks = rising carry trade (strong majors exotics a JPY that's weaker than even the USD).


FA:
From the large unwind it seemed buying USD for risk aversion was the reason the majors fell together with the carry pairs and exotics.

Today the USD appears to be wobbly due to recession and rate cut risks and stock markets dip because they are all proxies of the DJI =gt; europe back in drama (anti-USD), but shunning carry.

TA:
There has been a bounce out of a technically considerable USDX degree at 80 which unfolded in 3 waves of ABC which subsequently showed in a correction in EURUSD(and many others ), albeit a bit exaggerated.
After this the next spontaneous wave / a trend continuation happened as USDX hit some fibs / MAs / s/r, and later lost a trendline and the spike on Friday occurred.

Whatever else happened in the actual universe was of no issue to the chart.


I much prefer the chart.


At the end it doesn't matter exactly why as long as you understand ahead of time what the chart is saying where matters goes. If a TL breaks, if there goes a 10 touch s/r , if key amounts go, it's pretty much irrelevant what the rationale is , fact is - it's going.

But it's funny that there's always the need for an outside reason, also.

(I wonder as well a lot, makes it even more peculiar. Seems we always need a reason other than what the chart says)

hello! I had been trading the 5 minute charts of EJ, EU and GU, and believed that all three could go up according to a few moving averages. Did you make correct assessments of the instructions of these pairs? What charts are you currently looking at? And what time?

I'm also learning to spot key amounts to aid my trading. I've noticed that the majority of the times price chop about those amounts and by the time it really moved in earnest, I've lost my religion in these amounts. How do you deal with this? And, how do you decide your amounts?

Bluefox

Your Query was why did EUR/JPY drop during the NFP? , or in other words .

Me and attempted to explain what happened ,

and I will use his words...

Originally Posted by ;

The USDX fell. USDJPY is a part of the USDX basket. USDJPY fell quicker than EURUSD climbed. Therefore, EJ drops.

Even thought, you prefered to hear other awnsers that look pretty but are a bit misleading if we consider all the scenarios.

I will try to clarify again with easy words:

There are times when EJ is falling and carry trades are decreasing.
There are times when EJ is decreasing and carry trades are not falling.

Yesterday was one of those days where maybe the carry trades from US were decreasing but maybe not the Euros and Pounds carry trades.

We know when Euro and Pounds carry trades are decreasing if EU and GU fall also or stall.

When I talked about pips I am sorry if I didn't explain well, but is quite easy...

. .when we seem at GY by way of instance and see all that volatility, we have to consider, hey what an active pair, it must possess a lot of ppl trading it

nevertheless it's one of those less traded pairs in the majors group, do you really believe it? Low volume!

In different phrases in FX the pairs value are not just determined by simple trading of it. They are bonded in correlations and GY by way of instance is a product of this multipliion of GU with UJ

GU*UJ = GY

What I attempted to explain isn't the pip value or lots value or anything else like this.

What I tryed to explain is that, because GY is much more of a commodity of a multipliion than is own trading. Is correct to admit that one of those multipliors are going to have wonderful effect on his value regardless of the trading and regardless of the Pound actual value.

And like I said before if GU rise 10 pips and UJ shed the same 10 pips.... GY don't remain equivalent.... GY fall 9 pips.


A great example could be this. Check out Usd/Cad and look at Eur/Cad.

Everybody understands the reason of this Usd/Cad using a multi month bearish trend...

Price of oil rises, CAD values against the dollar because Canada is the 2 largest producer of oil and US imports from them.

However EurCad is also decreasing? Why? Due to the correlation... Since EU can not grow faster than US/Cad drops.


What I am trying to say here is that, on your trading life... you may see lots and lots of occasions EJ and GY decreasing with US bad news, and is better that you differentiate or else you will have lots of occasions on your mind that the fear is installed and isn't, which might afect your trading.



Many ppl around here are saying, hmmm Europe and Britain rely on US market accordingly. . EJ and GY will respond to that

But ... I gave the case of US 2002 recession. EJ isn't decreasing in that interval and from that times NFP were coming.

Stocks were declining, UJ was declining.... So... with the logic around EJ have to had fallen with US issues back then.

But it didn't because Euro was rising like a monster back then. Is not right to assume that everytime we view US problems the carries start to unwind.

Originally Posted by ;

The USDX fell. USDJPY is a part of the USDX basket. USDJPY fell quicker than EURUSD climbed. Therefore, EJ drops.

I hope you understand, I am sorry if I criticized you in the beggining. .

In case you don't understand something I said be particular.

Originally Posted by ;

I much prefer the chart.

In the end it doesn't matter why as long as you know beforehand what the chart is saying where matters will go. In case your 10 touch s/r low goes, if crucial levels go, it is pretty much immaterial what the reason is, truth is, if a TL breaks - it is going.

(Appears we always require a reason other than what the chart states )

I have a tendency to become a fundamental player, just because I don't like to be surprised when I place my money into something. The smallest fundamentals could do for me, would be always to make me avoid inputting after a potential new.

A tech trader will buy just a tiny retraction on a uptrend caused by a poor new, a fundamental participant understanding the seriousness of the new, may antecipate a deeper retrace/correction and avoid the market till further notice.


However now I believe in the power of techies as a prediction, which was something I didn't compreend before.

In fact, and I must emphasize this, I don't trade contrary to the techies.

I'm no veteran, but a lot of times previously I got some transactions burned because fundamentals were yelling long or short, but the market completly ignored. I realized that I was completly directly in the medium term, however, was trading contrary to the opinion. Bad idea.


In other words, is not that fundamentals don't matter, the problem is that the Foreign Exchange market tends to be surprised all the time. Very few antecipate deeply what is coming, therefore, first I take a look at the chart, then for fundamentals. As I said fundamentals should not offer me a reason, are just a filter for my transactions.

Buy the rumour, sell the fact is well known, but tech traders just buy the rumour, then don't know when to sell it, till they see it in the chart.

But admit, if some long term levels are broken, its apparent indeed that something is occurring and won't just stop from happening, therefore, we may antecipate a couple weeks ahead with the assistance of the chart.

What if this EUR increase against the USD was made by the banks in the united states, who sold a lot of USD and purchased YEN?
There isn't any way for the feds to decrease the interest rate, because with they will destroy the entire nation's economy. Remember it isn't just about the present, the future is a lot more important.
Fridays sell off of the USD I see it as a buble on the stock market. Simply untrue. Next week ought to go back where it was if futher down. Meaning strenghtening USD.
On the other hand when the US will play in a way to completely destroy its economy which will weaken the USD, a lot, then the only way out is a warfare. Israely planes are already shot at by syria. Iran of putting her down threatens, which I do not know how the hell they are going to do without US help. Truly even the US might need to fight with big and a lot against Iran. On the other hand if this war happens, it'll be a big one involving all continents and many countries. I suggest, that most of us who make money off of Forex, look for something out there to earn money, cause I do not believe Forex is going to be tradeble for besides banks .
Alright, it was a joke, so don't get carried away yet.
But somehow I have a feeling that it was not the ECB who went against the USD on Friday. But it occurred from inside the united states. Banks have issues and these issues can be repaired only with lots of cash. The Fed can not correct this problem for them, because with a rate cut would be just temporary. Apart from with a rate reduction inventory could fall tens of thousands of things since international investors would have no interest in investing or keeping their cash in here. And that would bring the US into recession, big time. The market will go pretty bad until among those banks pups upward as went into bankruptcy.
But hey I am not an economist. I may even be giberish here.

Regards...