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Forex Strategy Video: EURUSD and GBPUSD Relationship Points to a Reversal

By , Chief Currency Strategist
12 March 2014 19:28 GMT

Talking Points:

• Historically, the EURUSD and GBPUSD maintain a longer-term correlation

• Recently the two have deviated abruptly with each facing key technicals levels

• A convergence will likely result in a meaningful break for one, reversal another, and trend for both

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While there are both shared and independent fundamental drivers between EURUSD and GBPUSD, the pairs historically maintain a very strong correlation. We can use that to our advantage. Periods of divergence between these benchmark currency pairs do occur, but they do not often last for very long. And, when they resync, it often occurs with a significant reversal or breakout for one of the two and a sizable trend-based run for both. This relationship is particularly useful now with both pairs facing heavy technical levels - EURUSD at the top of a rising wedge at 1.3900 and GBPUSD threatening support on a rising channel near 1.6600/6500 - and an unforgiving quiet in broader markets. We discuss this relationship and its trade implications in today's Strategy Video.

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12 March 2014 19:28 GMT