View Full Version : why did EUR/JPY drop during NFP?
I have been GBP/USD EUR/USD and EUR/JPY since the london open and experimented with a trading thought now. I wasn't aware that NFP was coming this noon GMT. Luckily I was of my transactions, although the action actually scared me and I got out as soon as I could. Although I won't trade news, I have realised the risk of not paying attention to it. I browsed through the news and kind of understood EUR and GBP climbed so much, but I am still puzzled by the sudden drop of EUR/JPY. So far as I know, EUR/JPY's action has been parallel to that of EUR/USD. Did they behave so differently tonight? Could somebody please shed some light?
Perhaps people receiving their straight back from the Dollar after the bad US news. USDJPY fell than EURJPY.
A dollar reinforces the Yen on Yen pairs. You'll observe that the GBP/JPY dropped. A weak jobs number, broadly speaking, lessens the quantity of exports from Japan and makes US consumers have money. The economy of japan depends on a export industry.
the activity of EUR/JPY has been quite parallel to that of EUR/USD. Did they behave so differently ? Could somebody please shed some light? You're enrolled here because Feb 2006, did you make any transactions because then or you just like to watch the forum?
USD/JPY principles the others JPY pairs, and here is the actual reason why!
When USD/JPY drops, the least it can occur is another pairs drop just a little bit slower due to the support of another pairs like EU and GU pushing up in this circumstance.
However its all about the amount...
Should 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 few notice this, but its important....
What this means is that UJ pips are more stronger than the others despite we earn almost the exact same.
Considering EJ = EU * UJ.... This 0.01 * 0.0001 will have a influence on the final number. 0.01 will rule as it is a larger number.
Be well!
What this means is that UJ pips are more powerful than others despite we get almost exactly the same.
Since EJ = EU * UJ.... That 0.01 * 0.0001 will have a influence on the last number. 0.01 will rule since it is a larger number. Sorry, if a pip is 0.01 or 0.0001 doesn't make any difference .
The chief reason is that bad NFP numbers showed that US market is weak, and the stockmarkets dropped 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 dropped after NFP.
It appears that carry trades are used not just for profiting from the interest rate differential between low and high yielding currencies, but also yen are borrowed, also converted to EUR or GBP to buy stock. So when is a sell-off at the stock market, the yen is purchased back, thus the strengthening.
Sorry, whether a pip is 0.01 or 0.0001 doesn't make any difference .
The main rationale is that bad NFP numbers revealed that US economy is weak, and the stockmarkets dropped around the world. EUR/JPY is a carry trade pair, and carry trades are generally closely connected with stock markets. So EUR/JPY and GBP/JPY both dropped closely after NFP.
It seems that carry trades are used not just for profiting from your interest rate differential between low and high yielding currencies, but additionally yen are borrowed, and converted to EUR or GBP to buy stock. So when is a sell-off at the stock market, the yen is bought back, thus the strengthening. Great explanation...I was about to say the Exact Same thing
You're enrolled here because Feb 2006, did you make any transactions because you simply like to observe the forum?
USD/JPY rules the others JPY pairs, and here is the real reason why!
If USD/JPY falls, the least it can occur is another pairs drop just a little bit slower due to the support of another pairs such as EU and GU pushing up in such a 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 few notice this, but its significant....
This means is that UJ pips are more stronger than the others despite we earn almost the same.
Since EJ = EU * UJ.... That 0.01 * 0.0001 will have a impact on the last number. 0.01 will rule since it's a larger number.
Be well! Thx Warper...
I noticed today that ALL Yen pairs fell ( a bit hard )....aud/jpy, cad/jpy, nzd/jpy etc.....
Any thoughts as to why those pairs weakening, on bad US news?
THX
Fxj
Thx Warper...
I discovered today that ALL Yen pairs dropped ( somewhat hard )....aud/jpy, cad/jpy, nzd/jpy etc.....
Any thoughts as to why these pairs weakening, on poor US news?
THX
Fxj Hi FxJarhead!
IMHOI feel that all the high yielders are a proxy for desire risk. After the market is searching for high returns on their investments, the risky carry trade is the tendency. When volitility and a flight to security happens, the yen strengthens as investors dump the carry, the Dow drops and treasury notes strengthen. Dollars were thrown with U/J market away and we saw a strengthening of sterling and euro (haven't looked in the other currencies today), however, the profit was smaller than what could have been expected because dollars nevertheless needed to be repatriated due to the synthetic crosses. To sum up in ultra simplistic terms: The markets flew from risk (potential loss of capital/profit) and are believing security (profit protecting currency movement ).
Additionally, we must keep in mind that loans have been taken out from the country w/the lower interest rate to make investments in the other country w/the higher yielding currency (real estate, stocks, bonds, etc.). The yen loans need to be paid back and the risk to this egy is that the yen will value in the point at which the loan was taken. If the appreciation is a lot of, compared to curiosity or profit from devices can be wiped out. So, since the yen strengthens because of the dollar weakness, the retun on investment in AUD, CAD, NZD get contested and individuals become fearful of losing money. I believe we often forget how the carry functions and wonder why people flee so quickly by them w/market hiccups.
Hope you have a great weekend!
Thx Warper...
I noticed today that ALL Yen pairs dropped ( somewhat hard )....aud/jpy, cad/jpy, nzd/jpy etc.....
Any ideas as to why those pairs weakening, on bad US news?
THX
Fxj Fxj - I'd presume it's mostly to do with the consequence of relative speculative flows from the numerous countries getting pulled from the US, particularly in light of the US trade deficit with each. Genrally that the US runs a trade deficit with most major countries - that interrupts the dollar relative to other currencies, in the absence of flow investment. That investment hasn't been big enough to strengthen the dollar, except in the case of Japan, which in turn implies the insecure investment flow from Japan to the US is much larger (relative to commerce ) than for other countries. And because it's speculative, long term, it may leave much faster.
Now a sizable foreign investor pulling money out of a market (given news that will give rise to a market fall ) and repatriating funds (assuming the news will also drop the value of the market's county) quickly needs to do 2 things - sell the inventory, and establish a currency exchange to get the best possible price so that if the collateral transactions clear he can utilize the proceeds to pay the ccy transaction (this second part in reality is more likely done by ccy speculators according to expectation of outflow requirement, but for the time being that just complies the picture)... Because Japan appears to have furnished the most significant volume of spec investment relative to trade flows, the requirement for JPY moving another way will be much stronger, than state Euro or Aud. Which in turn means the other JPY crosses sink, to some greater or lesser degree.
An intriguing aspect of the inventory sell of was that there wasn't any afternoon healing, nor was there any specific dip in the Japan crosses, which means people are willing to carry the rollover's for awhile. Next week Ought to Be entertaining
Sorry, whether a pip is 0.01 or 0.0001 does not make any difference .
EUR/JPY is a carry trade pair, and carry trades are generally strongly correlated with stock markets. So GBP/JPY and EUR/JPY both fell strongly after NFP. I am sorry but once we don't understand what we're referring to, the least we can do would be to avoid bothering the others.
If someone around here paid focus on the carry trades dilemma, when it started to develop into the narrative of the year, you'd know that the sign to spot conveys calm or in other words, to spot the difference between a normal fall and also a carry unwind fall, would be to notice if EJ or GY for example are decreasing with the help of both EU and GU in the exact same moment.
The motive... as previously explained in this thread, is mainly because when the unwind is being done, the Pounds and Euros or other currencies are converted into Dollars and only then converted into Yens. Strenghtening Yen and Dollar.
Can we watched this today? No...
We only saw dollar market in most of pairs. If GU and EU did not climbed as anticipated is speculation blaming somekind because there were still another reasons for that increase of unwinding.
1- A component of terrible news to come were already priced in, the increase today was the remaining traders who were waiting.
Two - Technically the pairs were overbought at the time of the NFP.
But regarding the conveys subject, it is the USD/JPY who hasn't only chart correlation but physical correlation also with their stock market, since US stock traders borrow yen to buy dollars and then shares, not euros and pounds.
A couple of days ago we'd see EU and GU decreasing with US terrible news and rising with US good news. That's a indication of unwind.
Today it was the first time in the last month it didnt occurred because traders noticed the DOW recovered the losses of august and the currencys did not, so today we saw a detach from EU and GU against the shares, or in other words,... lets get back to normal...
The rationale there were unwind of EJ and GY in august was due to the nature of the issue. Credit and subprime crunch afecting European stocks also. But NFP..., if they weren't able to create jobs, why Europe should care at this point?
Conclusion...
UJ is the Person Who beneficiates from US stocks/treasuries buying.
If it drops or rises, it will have impact on the others due to the multipliion variable, since EU and GU can't compensate with the exact same volatibility considering the real number.
Good example...
Imagine UJ together with 115 and GU with 2.0100. GY will possess 231.15 at that moment.
Minutes after UJ drops 10 pips to 114.90 but GU rises 10 pips to 2.0110
GY fell to 231.06...! In revision both pairs rised and dropped an equal ammount of pips but the result is a fall of 9 pips on GY.
Is it hard to recognize it was the decreasing pair that caused the 9 pip fall?
There's a good way of convincing yourselfs of the.
Setup a UJ EJ EU charts or UJ GU GY, and Dow and SP 500 futures.
And wait for a collapse or a new like today.
You will notice that it is UJ who obeys into the shares in the first location.
You will notice that when UJ rejects a price in resistance of support, the others stall without a specific obstacles arround, or you will notice like today that UJ had been droping and the others were droping in a slower speed.
Just when GU stopped to rise permitted to GY shed more fast.
This means is that GY was not droping by itself, was droping as a multipliion variable caused by UJ and GU. Being UJ the sole pair of both falling, therefore, no real unwind, just USD sell. Regular sell.
An important thing to notice is this...
At the end of the day even in different days, you might observe that EJ and GY are stopped in somekind of specific barrier, but this is only due to the remainder of specialized traders ajusting the pair in the last shoots.
Thats why I ask you to put up that charts and look at them LIVE, to notice who obeys who.
... to get FxJarhead who asked this, the others pairs will fall on US awful news on everytime GU and EU can't override or overcome the UJ drop. But if we don't observe the real currency market, we understand the true about the fall.
How can we see if the most important currency is weaking or maybe not? In the trader pair of that currency. Euro case... EU.
Here is a good logic...
Imagine a machine which could throw a rock at a 100 meters space for each watt added.
A second machine which may throw more 200 meter space for each watt added.
And a third one which employs the engine of the other two combined to create his own throw. What occurs with the closing throw if we decrease watts on the next one and insert watts.
The throw of the last machine increases or declines?
Decreases Due to the fault of the first engine? Or in this case is it a fault of the Euro? No...
Hope this clarified. If not, hey I honor the individuals who disagree.
PS: I am studying some new articles and I am noticing clear mix/shuffle involving everything.
Yes there are flows... and Market correlation... but again... today was not the case.
Here is a proof.
This might seem contraditory but take a peek at the weekly charts of UJ throughout the US recession in 2002. And take a peek at the weekly charts of EJ in that year?
What do people find? We see EJ and UJ droping like a rock remaining.
Why? Where were the flows back afterward?
The motive is at EU that climbed about 1600 pips in 3 months assisting EJ to remain . When was the last time we found that type of energy from Euro? So, conclusion? US had problems back then but EJ stayed and there weren't unwinds.
So... if we're in the exact same place like back then, reason EJ dropped isn't because of the mindless unwind. Its just because Euro does not have performances like back then to help the UJ fall is overcome by EJ we see UJ droping is easy to presume that the others will follow, dependent on each pair functionality.
UJ droped in July but GY was climbing? Why? Because GU was a monster in those days. (1000 pip run)
Again... in somedays, its all about pairs volatility.
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.
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...
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 )
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?
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...
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.
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.
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...
And like I stated before if GU rise 10 pips and UJ drop the exact same 10 pips.... GY do not stay equal.... GY fall 9 pips.
Ok, I see what I mean. I misunderstood your initial article. But, still 10 pips in UJ and GU are completely different things - 10 pips in UJ is about 0.09percent move, but 10 pips in GU is a 0.05percent move, so of course the 10 pips go in UJ affects GY longer, and GY drops by approximately 0.04%.
hello ! I was trading the 5 minute charts of EJ, EU and GU, and believed that all three would go up according to a few of moving averages. How did you make assessments of the instructions of these pairs? What charts you looked at? And what time? Hi bluefox,
for longer duration key levels and trendlines I use Monthly, Weekly, Daily charts.
MY view is - if you're trading on the 5M chart, then you're asking for
trouble.
Especially when beginning.
And I did not make any assessment on EJ or UJ. It was unclear for me at the time so I stayed away. I might have sold an s/r fracture or retest of a TL that was busted which GJ and UJ did, but since earlier efforts got murdered I let it be.
I did not realize until later that the daily had an extremely clear bearish setup formed (double lower close inside bar =gt; bankrupt downwards)
EURUSD was creating another interim bottom at 1.3550 using a Pin Bar or Hammer and then greater highs. So it moved upward. I use Price Action to trade, as seen in my signature.
The meaning / effect of moving averages reduces together with the timeframe. Daily is pretty big, 4h is meh and 1h is catchy. Anything below that is pretty much leaping into the frying pan.
I'm also learning how to spot key levels to aid my trading. However I've noticed that the majority of the times price chop around those levels and I've lost my faith in these levels. How do you deal with this? And, how do you determine your key levels? By looking for bits / reactions of price on the huge timeframes. Check out posts on the thread for examples.
You do not trade s/r alone. You trade a price installation on s/r / regions of confluence (fibs s/r for example).
I truly think you need to do a lot more studying and reading on some of the basics like trendlines, the meaning of s/r and s/r flipping and so forth. .
The stuff is out there, just takes a while studying
Take good care of
Many ppl around here are saying, hmmm Europe and Britain depend on US market so. . EJ and GY will respond to this
But again... I gave the case of US 2002 recession. EJ is not decreasing in that interval and negative each month by that times NFP came.
Stocks were declining, UJ was declining.... So... with all the logic around EJ have to had fallen with US issues back then.
However, it did not because Euro was climbing like a beast back then. Is not right to assume that everytime we view US issues the conveys beginning to unwind.
Okay, looking at 2002 charts, I must concur with you that this is not always the case that US issues cause carry trade unwinding. Markets are never this simple, and requirements change, so it is best to not overgeneralise. But in 2002, relative interest rates were different, so maybe the understanding of market events by carry traders was distinct from what it is now, even though I might be completely confused.
Ok, I see what I mean. Sorry I misunderstood your original article. The reason I said this was just to explain the original thread poster, to understand who drags who.
He believed it was Eur/Usd that played a larger role on Eur/Jpy. I tried to say it is the way round.
Anyway... I believe we're spending too much time on this lol.
Once I talk something I love to believe, is this a vital thing in my future? Is this what will make the diference between the collapse and sucess?
In this case I must say no, so... lets revise our potential trading to another week. Money is made by that.
Ok, appearing at 2002 charts, I have to agree with you that this isn't necessarily the case that US problems cause carry trade unwinding. Markets are never this simple, and conditions always change, therefore it is best to not overgeneralise. But in 2002 interest rates were different, so perhaps the perception of market events by carry traders was different from what it is today, although I might be completely mistaken. I can't locate the Japan rates in 2002, but have an idea they were nearly the exact same.
US rates fell drom 6.5 to 1.5 at the space of 1.5 year before 2002.
Probably carries unwound because of the speed of the rates falling, but there were conveys back before the collapse.
EU rates droped from 5 to 3.... In that EJ stalling period.
This implies that in the end if we keep seing EU rates climbing or at UK, conveys in europe might not fall like us conveys.
It'll be just correlation dragging ej and gy not economic motives, unless we see the signal Eu decreasing a little.
However, as I said, I am not going to bother much with this. The market will tell me if it's important and I'm very patient.
Hello, Mr. Warper. Thank you for taking time to reply my question. I've read your post several times since yesterday, and I am happy to report that each time I read it, it kind of makes more sense https://forexintuitive.com/attachments/1519366820329234042.png. However, there are still a few points I don't understand. I'll point them out and attempt to form my questions the best I could.
Your question was why did EUR/JPY drop during the NFP? , or in other words yesterday.
Me and tried to describe what happened yesterday,
and I will use his words...
Even thought, you prefered to listen to other awnsers that look pretty but are somewhat misleading if we consider all of the scenarios. . This particular line you quoted from did answer my question. However it had been an analysis, I had been more interested in understanding how to predict this type of occasion. And when accurate predictions aren't possible, how to recognise the signs when things like this might happen.
I'll attempt to explain again with easy words:
There are times when EJ is falling and carry trades are falling.
There are times when EJ is falling and carry trades aren't falling.
Yesterday was one of those days where the carry trades from US were falling but maybe not the Euros and Pounds carry trades.
We know when Euro and Pounds carry trades are falling when EU and GU fall too or stall...
I don't understand this part nicely. You said Yesterday was one of the days where the carry trades from US were falling although maybe not the Euros and Pounds carry trades., but EUR/JPY did drop a lot. Is this a typo? Or am I?
When I spoke about pips I am sorry if I didn't explain well, however, is very easy...
. .when we look at GY by way of example and watch all that volatility, we have to consider, hey what a busy pair, it must possess a lot of ppl trading it
nevertheless it's among those less traded pairs in the majors group, do you think it? Low volume! ...
I've been told that volume isn't known for any particular currency pair, since there is absolutely no centralised exchang for Currency Market. How do you decide the volume for this market?
In different words in Currency Market the pairs worth aren't only determined by simple trading of it. They are ensured in correlations and GY by way of example is a product of this multipliion of GU using UJ
GU*UJ = GY
What I tried to describe isn't the pip value or lots value or anything like that.
What I tryed to describe is that, since GY is more of a commodity of a multipliion than is own trading. Is right to admit that among those multipliors are going to have fantastic impact on his worth regardless of the trading and regardless of the Pound actual value.
And as I stated before if GU rise 10 pips and UJ drop the exact same 10 pips.... GY don't remain equal.... GY drop 9 pips.
If this is indeed the case, how can one decide that multior is the more powerful one? As an example, in accordance with your concept, EUR/CHF = EUR/USD * USD/CHF? Can I assume that euro is the more powerful multiplior, since EUR/USD has been in an uptrend?
A great example might 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 increases, CAD values against the dollar since Canada is the two largest producer of oil and US imports from them.
However EurCad is also falling? Why? Because of the correlation... Since EU can not rise faster than US/Cad drops. .
Ok, I understand a bit more now. Both euro and cad have been appreciating against the dollar. But because cad worth is increasing faster and more powerful drops, right? Is this to it? Does the economic connections between europe and canada play no role at all?
What I am trying to say here is that, in your own trading life... you'll see lots and lots of occasions EJ and GY falling with US bad news, and is better for you to distinguish or else you'll have lots of occasions in mind that the fear is set up and isn't, which may afect your own trading.
Many ppl around here are saying, hmmm Europe and Britain depend on US market accordingly. . EJ and GY will react to that
But again... I gave the example of US 2002 recession. EJ isn't falling in that period and negative each month by that times NFP came.
Stocks were declining, UJ was declining.... So... with the logic around EJ have to had fallen with US problems back then.
However, it didn't because Euro was climbing like a monster back then. So, isn't appropriate to assume that everytime we view US problems the conveys beginning to unwind
okay, I get your point. Bad news does not necessarily mean the carry trades will probably collapse. Their directions depend on the multiplior.
I hope you understand, I am sorry if I chased you in the beggining. .
If you don't understand something I said be specific.
It is okay, I am a newcomer, you are a pro. Your criticise made me need to learn more, and understand more. Thank you for taking time to criticise me https://forexintuitive.com/attachments/15193668211614123741.png
I may be wrong about this but one that I discovered was that there was a huge gap between the analyst estimation and the number which I presumed would activate the more intense and faster fall of this pair than normal on last Friday. It was my first time to observe a gap between those two numbers.
Hi,
for more term key amounts and trendlines I use Monthly, Weekly, Daily charts.
MY opinion is - if you're trading on the 5M chart, then you're asking for
trouble.
Particularly when beginning.
And I did not make any assessment on EJ or UJ. So I stayed away it was unclear to me at the time. I could have sold an s/r break or retest of a broken TL that both GJ and UJ failed, but since attempts got killed I let it be.
I did not realize until afterwards that the daily had an extremely clear bearish installment formed (double lower close interior bar =gt; bankrupt downwards)
EURUSD was creating another interim bottom at 1.3550 with a Pin Bar or Hammer and then greater highs. So it was moving up. I use Price Action to trade, as seen in my touch.
The significance / effect of moving averages reduces together with the timeframe. Daily is big, 4h is meh and 1h is tricky. Anything below that is pretty much leaping into the skillet.
By looking for bits / reactions of price on the huge timeframes. Check out articles on the ribbon for examples.
You don't trade s/r alone. You trade a price installation on s/r / regions of confluence (fibs s/r for example).
I truly think you want to do a lot more reading and studying on some of the principles like trendlines, the significance of s/r and s/r flipping and so forth. .
The material is out there, just takes some reading
Take good care of
https://forexintuitive.com/attachments/15193668221438264434.png for the 1st period of my trading career, I attempted to keep away from the market and allow a program trade for me. It did not work out.
Recently I have read a Superb book by Dr. Brett Steenbarger. He hammered home a point that in trading nothing beats on screen time. That means, systematically introduce oneself to the market as frequently as you can, and make as many transactions as possible, it's the only way an individual can find a sense of the market. Of course, he recommended that this needs to be completed in simulation and under the supervision of an experienced mentor.
I don't have a mentor, nor do I trade in simulation. Instead, I trade real with small lot size, and I am experimenting with many ideas, hoping to finally produce sth like a method.
I have to say the last few weeks' screen time and real trading has genuinely given me a much better understanding of myself and the market.
But I still dont' have a strategy yet. I have picked up bits and pieces there and here, I believe some of them include truth about trading. If only I could make the connections. I hope the wisdom will come with expertise.
I neglected to observe this dual high lower close interior bar =gt; broke downwards installation on EJ chart. Instead I noticed a pin pub had formed on 4 Sep. however the pin's tip was broken today, this has got to be bearish, right?
To begin with, I have to tell you that I'm not a pro, you are able to listen for me, only in the event that you'd like.
My humble understanding on this particular issues is based on information that I collect from my University and sites that I consider to be reliable, based on great past fundamental calls and much more important... based on coherence, which is the fact that they don't change opinion everyday. I trust them not just by chance and as they researched it deeply.
But nobody can assure if I'm right or wrong.
I had been interested in understanding how to forecast this kind of event. And when accurate predictions are not possible, the way to recognise the signs when things like this might occur. Well, thats why the saying risk aversion exists. Risk aversion is a sort of behavior from investors under doubt, that prevents them from investing in a risky game even if the expected yield is in their own favor.
Since we have a positive yield vs the risk, its nearly impossible to antecipate if the panic might get installed because, its panic from the others not from the fundamentals of the investment.
This means that carry trades are still quite great for them, the rates favor dolar vs yen investement, but they have fear of what others might do.
That's why hundreds of news sites and analysts tried to call a reversal almost everyday on the last year, but not got it right.
Thus... the best way to know when conveys might be unwound again is when the panic is around. There is the VIX it is a volatility index in the stock market. Carries work better so when a VIX is combined with a sideways sort of activity, that could spell trouble.
Being high... combined with a bullish activity is poor because a bubble can form. High volatility in the stock market is poor.
And as I mentioned, because panic instances, the main currencies tend to act in a counter-intuitive means into the news. For instance.... EU and GU dropped hundreds of pips in days after the earliest news of the funds. This is a signal. A pair responding oposite of what was supposed. Yesterday they were bullish, right as they should.
So this is the best way to spot potential and further carrie unwind.
-High Volatibility in stock market largely sideways, rising and droping everyday without any good reason
-EU and GU acting bearish on bad news from US
This is not a must unwind ABC, this just suggests that at this periods the bad news tend to have a 100x impact and decent news almost dismissed. Which contributes to unwind if we consider probability of the next new be bad.
I don't know this part nicely. You said was one of those times where maybe the carry trades out of US were falling but not the Euros and Pounds carry trades., but EUR/JPY did fall a lot. Is it a typo? Or am I? No. I will give you an example of what I mean. Imagine that US carries unwind to the max. EJ will fall because of currency correlation but, what I mean is that we'll reach a point when UJ has nothing left to loose but EJ is with a value of becoming a carry trade pair.
Quite simply, yes you can consider that each and every pip we see EJ droping is a mini carry trade unwind, but in the end what I'm saying is that UJ might end up completly dry but not EJ.
I have been told that volume is not known for any specific currency pair, because there's absolutely no centralised exchang for forex. How can you decide the volume with this market? You are correct, but everything has estimates. The traders give a general estimate and can estimate their trading volume. But the way you can know what pair is less or more traded is looking for the disperse. The tighest the disperse, more traded that pair is. (Don't confuse with spreads during major events, I mean only daily average spreads)
if that is indeed true, how can one decide which multior is the more powerful one? By way of instance, according to your concept, EUR/CHF = EUR/USD * USD/CHF? Can I assume that in this case euro is the multiplior, because EUR/USD was in an uptrend? Its not about trends its about average volatibility of each pair as well as the characteristics of the number.
Look at UJ, 115. Xx for instance, and search for EU 1. Xxxx
Are you discovering that UJ is a big number 115 and EU its only 1
If Uj drops 100 pips it's going to pass from 115 to 114 losing one entire unity... EU will still be 1 unity.
Uj rises 1000 pips from 115 to 125 gaining 10 unities (125-115=10).... EU rises 1000 pips and it is still 1 unity 1. Xxxx
Thus in terms of the number UJ will impact more the real value. In the case of USD CHF the volatility and numbers are very near. However, I don't exchange them to have a good opinion.
ok, I know a bit more today. Equally euro and cad are appreciating against the dollar. But because cad value is growing eur/cad drops, more powerful and faster, right? Is this all to it? Does the economic connections between europe and canada play with no role in any way? Everything has a relationship but this is just another case of correlation. It's US that imports Oil out of Canada and US is the biggest importer in the world I believe, so they endure the most against Canada.
However, if EU can't grow faster than USD/Cad drops so Eur/Cad falls also.
Its similar to water at a glass. It you put your finger the water appears to grow but its the water there. It merely moved.
Or for example... its just like a championship. The winner is the best of them he did not beat for instance, the guy who played against the guy in the semi final he played in the closing. The guy who did it believed was beaten by him.
Complied?
Its exactly the same... Europe is not being beated by canada but canada is becoming more faster more powerful than America compared to Europe is becoming stronger from that same america.
So CAD wins the championship, because it was the best but he just beated USD, Euro didnt won because had less things than Cad against precisely the same USD.
Do the same thinking for jpy pairs rather than cad.
ok, I get your point. Bad news does not mean the carry trades will collapse. Their directions rely on the multiplior.
Appearance... this might not be super important but the important thing to keep in mind in this entire discussion is that, if you want to exchange an US new on UJ you might use EY or GY to create more pips at anytime, just since I've been doing.
Quite simply you dont need to wonder... Hmm will conveys be unwind tomorrow with this new? Should I brief? Is the panic?
If its poor for UJ and you brief the other jpy pairs, you'll always win or you dont lose nothing, regardless of what other reasons might exist.
That will never change until xxx/usd pairs become all beasts and Uj turned into a normal value pair.
We're far from that.
Good trading for another week!
Thx pips4uandme, HalifaxCB, FumaFuma, and Warper for Reacting....along with the rest of the contributors.
I learned ALOT about the fundies at play here.
Took me some time to read all of the posts and digest the info.
Fxj
What if this EUR increase against the USD was made by the banks in the US, who sold a lot of USD and bought YEN?
After all there is not any way for the feds to decrease the interest rate, because with that they will ruin the whole country's economy. Remember it is about the present, the future is a lot more important.
Fridays sell from the USD I see it as a buble on the stock market. Simply untrue. Next week should go back if futher down where it had been. Meaning strenghtening USD.
On the other hand when the US is going to play at a way to completely destroy its own economy that will weaken the USD, a lot, then the only way out is a warfare. Israely planes are already shot at by syria. Israel threatens Iran of placing her down, which I don't know they will do without US help. Truly even the US will have to fight with a plus big lot against Iran. On the other hand if this war happens, it'll be a one involving nations and all continents. I suggest, that most of us who make money from Forex, look for something else on the market to earn money, cause I don't think Forex will be tradeble for besides banks .
Alright, it was a joke, so don't get carried away nonetheless.
But I have a feeling that it was not the ECB who travelled against the USD on Friday. But instead it happened from within the united states. Banks have problems to correct, and these problems can be repaired only with lots of money. The Fed can't correct this issue for them, as with a rate cut would be only momentary. Apart from with a rate cut inventory could fall thousands of things because global investors would have no interest in keeping or investing their money in here. And that would bring the US into recession, big time. Right now the market will go quite bad until one of the banks pups upward as went to bankruptcy.
But hey I am not an economist. I might be giberish here.
Regards... Hello attrium,
I'm not an economist either, however I try to consider how someone with millions/billions of dollars in the market may react to different conditions. Speculation is based on expecting market reaction which is usually predied on individual emotion (that's where TA is therefore instrumental to trading. . .FA provides us a long term view to frame our decisions, and if you have super deep pockets, build positions around).
Global markets have been intrinsictly connected. If one major economy fails finally other markets will collapse as well. The US economy is instrumental in almost every other (who'll buy from China when the US consumer can't buy? . . .Canada. . .the US is the biggest trade partner. . .and a weak dollar strong loonie impacts Canadian Corporate Profits. . .good for their economy?) . Total a weak dollar is good for the US at the moment. Why? As it contributes to higher quantity of oversea sales. . .which in effect could cause more earnings to US businesses ). Totally off-subject...
whom I want to go w/this post is your interest rate cut and the stock market. Interest rate cuts are usually bad for currency valuation BUT is generally positive for the stock market! It's a reverse relationship (normally). Why? Because Corporate Profits are usually higher when calculating costs decrease. Higher profits = higher stock values. Based on strict fundamentals, there isn't any reason for the carry trade to unwind. Fundamentally, the egy is still legitimate. However, the egy depends on long term stability. Long-term stability requires low volitility and high liquidity (will this happen w/interest rate cuts?) . Is this? Is the VIX under 20? Is your Yield on short-term bonds falling? How do you see speculators reacting to a possible monetary loss (keeping in mind, markets have a brief term memory)?
Then, consider the international scale. . .do you think that the BOE or even ECB will continue to increase rates on the short term when the US is undergoing bandwidth problems that could spread? Who will buy their goods/invest in their markets and how do they get it done? Can you believe that each bank acts without considering the viability of their spouses economic problems? Why not the BOE or ECB increase rates w/their past meeting? Again, how will the fund managers market participants react to actions?
When trading currencies, both basic FA theories are interest rate differentials and Weak economy/Strong economy. When these theories are fulfilled, but prices are not acting so -- what does it mean? How do we exchange it? Again, TA -- that the charts will tell us the way market participants are behaving. Correlations can diverge and it is possible to have U/J go 1 way and E/J and G/J and A/J proceed in different directions....especially considering assumption 2 of FA: Strong/Weak (Aud is Strong/US is Poor. . .how many will speculate there? Then hypothetically, little change with U/J aside from transactions to convert to AUD). Nothing functions. . .everything is intertwined. The idea process can drive you insane and overwhelm. The step imho, right now, is much FEAR exists in the marketplace. FEAR will cause a decrease in carry pairs (temporarily?) Until logic comes back and the participants realize nothing fundamentally has changed -- if that is indeed the case.
Personally, I simply think Fear. . .is it there? If so, Carry's unwind accross the board. If not, then they stabilize and grow....Then I search for GREED. It's not necessary to measure the correlation. . .Just search for the paths on the charts. I'm short term trader.
These explanations regarding the EURJPY falling with a US feeble economy may be partially accurate, but I don't see the corellation between the largest fall in almost any currency that I can remember, 716 pips, 5 TIMES it is daily average.
The stock market has taken big hits before and NFP has given poor numbers before: nevertheless we have never seen anything like 9-4-08. There MUST be extra motive or another. I understand BOJ intervenes sometimes. . .does anyone know how to confirm intervention?
These explanations regarding the EURJPY falling with a US feeble market may be partially accurate, but I don't see the corellation between the largest drop in any currency that I can remember, 716 pips, 5 TIMES it's daily average.
The stock market has taken big hits before and NFP has contributed bad numbers before: still we have never noticed anything like 9-4-08. There MUST be another or motive. BOJ intervenes is known by me sometimes. . .does anyone know how to confirm intervention?
There's no one occasion like'an intervention' that will give you the keys to the city. The carry trade is an ongoing event because of the differential in interest rates between JPY and EUR. It's a little more complex than that, but for now both Sterling and the EUR are feeling some stress so folks are realigning their money. The G/U also dropped in August - 2500 pips because 8/6.
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