cousins of Forex

The final two days last week while I was trading the yen crosses I noticed an interesting correlation shift between the yens and their majors, specifically between the EUR/JPY and its cousin, the EUR/USD and the GBP/JPY and its cousin, the GBP/USD. I'll get to that part in a moment, but before we dissect that potential correlation shift we need to put some things in perspective in regards to the Japanese yen.

Overall, the JPY put in a rather strong week, especially against the USD, even in the face of equities that were able to rally after selling-off earlier in the week. Under "normal" market conditions, the exact opposite would have been the case as riskier appetites send their money-flows into equities and out of the yen, and based on that fairly solid and steady market correlation, the yen crosses would have been driven higher as the S&P 500 and Dow made back their losses.

That wasn't exactly the case for one of the two yen crosses... earlier in the week I gave a GJ support level of 141.50 which did manage to hold solid all week, but there was a definite shift in the correlation between the GU, GJ, and equities... both the EUR/USD and GBP/USD managed to put in a rather strong performance on Thursday and Friday, however, the GBP/JPY sold-off to a much larger degree than the EUR/JPY even though they generally follow each other when equities are strong and their cousins remain well supported, which was the case at the end of last week.

On Friday the EUR/JPY made its high for the day and remained well supported to the upside just as the EUR/USD was putting in the same exact performance. The GBP/USD also remained fairly supported yet the GBP/JPY was sold-off with conviction. As the euro was testing the 1.3300 level its cousin was testing the 129.00 level, which were their top of the range highs, correspondingly, while the pound sterling was testing its highs at the 1.4770 level and was able to remain supported above 1.4700, the GJ was plummeting down to the 142.50 level which was 200-points lower than its high. Within the GJ's price action it showed zero signs it should be bought and was screaming "sell me" from the time NY opened and right through the close.