Well, it kind of looks like it. Last Tuesday I was trading GBPJPY and the way the price action moved that day felt tight and compacted. When i was skipping through charts of the S&P this morning, I was surprised to see such a tight mirroring of price. I don't really like the concept of correlations, so i'm gonna avoid that word. I don't think they are correlated, but perhaps pound yen is a proxy for 'risk on/risk off' sentiment at the moment.
Not taking anything more from this than the observation.
This analysis is correct. Yen pays negative interest rate so flight to the Yen is purely about the Yen's status as a safe haven. You will see the same when looking at GBP/CHF as well. The GBP has always been seen as a barometer for risk appetite as is also the case for the S&P500 index.
n38steps
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@DavidSimpson, thanks for the comment david. Yes, it's an interesting dynamic. I noticed on your profile that you seem to trade quite a lot of gbpjpy. Do you use these types of connections in your decision making process?
DavidSimpson
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@n38steps, For general market sentiment yes, but my approach is often contrarian so in a risk-on market I am often risk-off and vice-versa. I seek to find points in the market where the market is sure of its direction and then I do the opposite.
n38steps
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@DavidSimpson, interesting. I have been trying to develop more of a sense of correlation between assets, for example watching bonds and yields as a form of sentiment for the dollar etc. Nothing great stands out as yet, but I feel there is some kind of connection there.
DavidSimpson
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@n38steps, covered interest parity analysis is somewhat useful for Daily chart trends, but I think technical analysis is your best bet. The market is extremely efficient at pricing in all the relevant and available information, and there really are only every major corrections when new information is made public or has been leaked, both of which come out in the price action regardless.