Originally posted at forexfactory on Dec 23, 2010.
Originally Posted by mfurlendIs it possible for EURUSD and GBPUSD to have no price change at the same instant as EURGBP increases?
Well lets think about it.
Lets say EUR/USD and GBP/USD wil stay flat. Then lets say EUR/GBP will go up 70 pips or so. Then lets assume that USD is Flat/neutral across the board.
EUR/GBP going up 70 pips means people are buying EUR’s by dumping GBP’s, meaning that it will tend to put selling pressure on gbp/usd and buying pressure on eur/usd all else being equal. It’s called cross pair flows. Now if EUR/GBP goes on uptrend for a few hundred pips you should definitely see it in the price action as rallies in GBP/USD get capped, and support levels get broken more easier than EUR/USD, and in EUR/USD resistance get broken more easily, and support is present more easily. It also depends what the dollar is doing.
As for the triangular arbitrage stuff I would have to think about that a bit more.