Oil Exerting Strong Influence on EUR/USD and USD/JPY Pairs
The EUR/USD and USD/JPY pairs are experiencing an identity crisis as traders struggle to determine whether they're trading currencies or crude oil futures. The relationship between energy markets, US yields, and broader FX movements has become increasingly tight, with Brent-US yield correlations remaining strongest in the belly and long end.
US two-year yields have shown a particularly enduring relationship with EUR/USD, while USD/JPY correlations remain firm across US yields and rate spreads. However, the technical picture for both pairs still favors selling strength and downside breaks.
The daily chart for EUR/USD shows a run of lower highs and lower lows, along with a break beneath key medium and long-term moving averages, indicating elevated risk of a downside break. If 1.1325 support cracks, there's little technical support until 1.1200.