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EURJPY question

Discussion in 'General Forex Talk' started by Pharaoh, Oct 5, 2007.

  1. Pharaoh

    Pharaoh Colonel

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    Yesterday, I entered long on the EURJPY based on the longterm uptrend. Normally, I daytrade, but have been exploring swing trading (especially after the pounding I took earlier in the week). I specifically selected a non-USD pair since I didn't want the US Nonfarm Employment report to send me into the stoploss abyss.

    This morning (8 am eastern), the price was wandering around breakeven. Since it was a longterm trade and had nothing to to with the dollar, I ignored it while getting ready for the Nonfarm Employment report. After the fun was over, I went back and looked at it. Just when the Nonfarm report came out, the 5 minute chart had a 50 pip doji, followed by another candle with very long wicks, and then another doji.

    My question is: Why would the EURJPY react so strongly (and so oddly) to the US Nonfarm Employment report? :confused:
     
  2. Dealgone

    Dealgone Private

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    Simple because it is Forex

    I ask this to myself too today just before on the Canadian Employment Change that was released 90minutes before the US Nonfarm Employment report.

    Why should USD/CAD pair drop on good Canadian Employment news? Why should the USD be less worth?

    Well you can think this way:
    As more people get a job in a specific country as more they can spent for living and other things and so drive the economy of this country upwards. So the Canadian economy becomes more favourable at this time than the one from US.

    Well I do not think this way.
    I know it is more global and complex but many traders think simple.

    Anyway the Canadian $ is currently overvalued. But this is also Forex nature.

    I don't ask why. It is just the market. The nature of Forex.
     
  3. 3BlackCrows

    3BlackCrows Corporal

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    Answer to your Question

    Hi Pharoah,

    Allow me to answer your question.

    With all due respect to Dealgone and despite your statement that it's 'Because it's Forex', I have to politley disagree.

    The reason you saw such a reaction is this:

    The JPY is so closley tied with the USD, they are practically one and the same.

    The reason is that for years now Japanese banks have been helping to prop up the Amrican currency by buying vast swathes of dollars. I wont get into the technicals of how this works because that is an ebook in itself. In doing so they have helped in averting many a crisis.

    Therefore any currency that is tied to the JPY also has a very close link with the USD and any news or reaction to the USD will have a spillover effect to the yen.

    In saying that though, because of the mess and mismanagement of the American economy (sorry to American readers but the current administration is bankrupting your great nation), Japan is beginning to refuse to help out their long term ally lest they go under too.

    Also Dealgone regarding your comment on the CAD:

    Don't let your mind or technical indicators fool you. The CAD looks like it has more upward movement in it yet.

    You have to look at the long term fundamentals rather than something that's a blip on the radar such as an employment report.

    You may have heard that Oil prices are at record highs. Guess which countries economy and currency gets an incredible boost when Oil prices rise?

    Canada.

    Canada far outstrips the US in terms of oil reserves and this is what you are seeing in their currency.

    If you could put an overlay of the chart of crude prices versus the USD/CAD pair you would see extreme opposites on how both behave.

    When oil prices go down, the pair goes up and vice versa.

    The same is true with gold prices (gold goes down USD goes up)

    You could make an extreme amount of money by just position trading this pair while watching oil prices.

    Everything is interconnected and no market is immune to the effects of another seemingly uncorresponding market.

    That's why certain people trade using neural networks.

    You should always be reading up on the financial news of a country whose currency pair you are trading and always take long term fundamentals into account rather than short term fundamentals.

    A good example is GBP/USD.

    It was trending up nicely until the Northern Rock Bank crisis hit which made it tank but only for a week and never back down to the previous support level where the trend started.

    The long term fundamentals and trend was always up and a blip like a bank threatening to go under would only ever set the currency back marginally.

    Now look at the pair - it's pushing higher and higher well past levels where the Northern Rock debacle hit and looks to be set to skyrocket upwards.

    There's so much more to this business than reading a news release or simply looking at a chart.

    The more info you have and knowledge of how that info will affect things, the greater your edge.

    Never stop learning or reading!

    Hope this helps - Happy Trading!
     
    #3 3BlackCrows, Oct 6, 2007
    Last edited: Oct 6, 2007

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