Q: Do currency crosses have the ability to drive major pairs?
Do currency crosses have the ability to drive major pairs? How do you know if the cross price action is dependent or independent of the underlying currency involved?
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Yes! Currency crosses DO have the ability to drive movements in the majors and this is particularly true for the Japanese Yen crosses. There could be a situation where traders are dumping everything related to the “Yen” including EUR/JPY for example and if the sell-off is strong enough, it will also drive the EUR/USD lower. Currency crosses can also drive the movements in the majors when there are large merger and acquisition transactions that require a currency conversion. For example, if an Australian company decides to invest in or buy a Canadian company, that will involve a large conversion of Australian dollars into Canadian dollars. When that occurs the big move will be in AUD/CAD but we can also see the transaction drive the AUD/USD and USD/CAD lower.
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