Oil Prices Fuel Identity Crisis in EUR/USD and USD/JPY Markets

The relationship between EUR/USD and USD/JPY is being influenced by oil prices and US yields, causing an identity crisis among traders. The link between Brent crude and US yield curve has strengthened across five, ten, and twenty-session windows, with the strongest correlation seen in the belly and long end of the curve.

The EUR/USD pair is closely tied to US yield movements, with a lockstep inverse relationship observed. However, the technical picture still favors selling strength and downside breaks, with the daily chart showing lower highs and lower lows.

If 1.1325 support cracks, the risk of a downside break increases, with little technical support until 1.1200. The pair's recent downtrend is evident in its break beneath medium and long-term moving averages.

The USD/JPY pair is also influenced by US yields and rate spreads, with a strong inverse relationship observed between Japanese and US two-year yield spreads. However, the ongoing threat of intervention from Japanese or US authorities remains, with 158.00-158.50 being a key danger zone.