By: Jay Norris, Senior Market Strategist and Forex Educator
Many traders want to believe that there is a commonality which runs through the markets which they can discern and will lead to profitable trading. There certainly are leading indicator markets, but the challange comes in figuring out which markets are going to lead at any particular point in the global business cycle. We understand the impotance of applying parallel analysis to the various markets, which is very similair to using Dow Theory when analysing stock indices and confirming market direction, however we don’t use that as a trade trigger. We teach that a trade trigger, or signal, should be a fact based occurence in an individual market. We don’t disagree that there are relationships between the markets that we can use to confirm, or pass on a particualr trade, but we know that by definition relationships evolve and change, and that they are not always fact based.
GBPJPY is of interest to us now because of its current stance on the higher time frames. It also happened to be a leader on the way up in ‘06 & ‘07 and a leader on the way down last year. We don’t know if that will continue but as of right now the direction is down on both the Daily and Weekly charts and very close to the price point on the Monthly chart which would indicate a shift should it close below it. See TrendMap below.
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