Given risk-on and risk-off mood swings, the best forex barometer may be the euro as the stops at 1.1...
A Correlation at All-Time High
03/12/2013 9:00 am EST
After the most recent election, the Japanese government made no secret of the fact that it was willing to do whatever it takes to devalue its currency, Jared Woodard of CondorOptions.com notes an increased correlation with the Nikkei.
The decline in the yen since last October has given a boost to export-oriented Japanese companies, and the Nikkei has rallied accordingly. Historically, though, USD/JPY and Japanese equities haven’t been nearly so correlated.
Six-month realized correlation between the currency pair and the stock index reached levels in January that have been seen only rarely since 1980.
And if you’ll excuse the noise, you can see above that one-month correlation in January reached a new high at about 0.81.
For the last few months, the short yen/long equity orientation really has been all one trade. If correlations revert to longer-term averages, though, it will start to matter more how traders express their views about the deflation-fighting power of Abenomics.
By Jared Woodard of CondorOptions.com
Related Articles on CURRENCIES
As long as we hold over the 91.70 region in the US Dollar Index, many may wind up quite shocked with...
Trading Lesson, fourth in a series: Here are over a dozen tips for traders to safeguard themselves w...
Minimize risk, take partial profits quickly, and stay in the trade. Wait for your objective to be re...