It is not always sufficiently appreciated that a large majority of Forex trading (something like 80%+ by volume) is conducted in other three currency pairs: EUR/USD, USD/JPY, and GBP/USD. Along with the USD/CHF currency pair, these are commonly known as “the four major pairs”, although in recent years there is more trading in the AUD/USD currency pair than in USD/CHF. You can do just fine trading Forex if you just stick to those three pairs as these are where most of the movement, volume and action is anyway. These are the pairs that traders spend most of their time watching and which contain the world’s most important currency exchange rates.
As these three currency pairs are so significant, and are so watched, it follows logically that these are the pairs where major support and resistance levels are most closely watched. Not only that, but when two or even three of these currency pairs are all approaching key levels at the same time, it is advisable to sit up and take notice, as something big might be happening. This week, we have reached a point where all three currency pairs seem delicately poised.
The EUR/USD currency pair has been carving out a bottom over the past year or so, and is facing a huge resistance level at 1.1000 which is holding the pair back from developing a truly strong bullish trend. There is also a long-term bearish trend line confluent with this level. The GBP/USD currency pair is in a very similar position, although it is in a more bullish position already, and the key resistance level holding the pair back is 1.3000. As for the USD/JPY pair, it is being held back by key resistance and a long-term bearish trend line at 112.91.
The upshot of all this is that the British Pound and Euro are approaching a deeply pivotal point, as is the Japanese Yen. If all three break, we could see great long opportunities in the GBP/JPY and EUR/JPY currency crosses. Alternatively, if all the levels hold, there could be equally good opportunities to short those two crosses. Watch these levels carefully!
