Is the $EURJPY Telling Us Something?
One currency pair that many traders watch is the $EURJPY. It’s historically been correlated with equity markets and is a good proxy on risk taking in the marketplace.
Back in March, two weeks before equity markets rallied, the $EURJPY started moving up, perhaps signaling the rally. Since then the two have moved pretty much in lockstep – until recently.
Below is a chart (click to enlarge) showing how recently the two have diverged. The $EURJPY is selling off whereas the market has been trading in a range off the year’s highs
Surely, the $EURJPY can play catchup, and since the dollar has become the carry trade currency of choice old relationships may not hold. Regardless, this is a relationship to watch.