Trading University, Chicago Blog

By Jay Norris

While EURUSD may be the most heavily traded currency, particularly among retail account holders, it is USDJPY in my experience which is the most influential currency pair. USDJPY proved this again today after it bottomed right on it’s Monthly Central Pivot and just above the 50% retrace of the March rally on the London open, and then led not just the other yen pairs higher on the day, but lifted the majors toward the top of thier daily ranges.    

What makes USDJPY so influential of a pair is the perception that our financial universe is a much friendlier place when the Japanese are investing in the world wide economy — selling yen — and not withdrawing from it  — buying yen. Japanese investors are still among the most influential in today’s marketplace.    

 While today’s currency market performance is an important reminder of keeping track of whose a  leader and whose a laggard, I wouldn’t put so much emphasis on dollar strength just yet, as on yen weakness. Yen weakness today meant AUDJPY, EURJPY & GBPJPY strength which may be telling us that the rallies in those base currencies that kicked off at the end of March may have a little more life in them. It did not go unnoticed that EURUSD bottomed today right on the 66% retrace of the previous 400 pip rally which technically means the current trend on the daily chart is still higher…ditto for GBPUSD.        

Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009, and a principal in Trading-U.com

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DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.

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