Busy European and London trading sessions saw all the New York USD/JPY gains given up as EUR/JPY broke from 143.80, and then accelerated lower after stops below 143.60 were triggered. We were not in the market last night as USD/JPY couldn't break through the New York session highs, but it was a nice look at intra-market relationships that we should be on the lookout for in the future.

The New York session has been pretty quiet ahead of the long Memorial Day weekend, and aside from end-of-week position squaring, we should expect the same for tomorrow. We did play a light USD/JPY scalp against the hourly trend channel shown below and will be looking for continued support against this 111.80 level. EUR/JPY remains heavily offered, so we should continue to expect a rather lethargic bounce from this USD/JPY support level until EUR/JPY can regain its footing.

EUR/USD on the other hand, has fallen into a nice bear flag pattern on the inset 60-minute chart, which points to a possible 1.2750 break. If you recall, 1.2750 is also the very bottom of a daily uptrend channel support and a break here would be very technically significant. If EUR/JPY continues the push lower, let's look to be long dollars against this euro pattern below 1.2750.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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