- I've highlighted the areas where the USD/JPY
correlation with the Nikkei has broken down in the past calendar year. These periods happened to be during declines or flat spots in the USD/JPY
. They made up almost all of the significant down trends in the past year as well. The main glaring exception is the decline from the peak at 103.726. My assumption is that case was different than the normal ebb and flow of the market, and since major market sentiment was still in tandem, the correlation between the two held up. It's also worth noting that the stochastic
was a pretty good early indicator of a breakdown between the correlation.
- If the stochastic
continues rolling along at or near overbought, I expect the correlation to hold up with both the USD/JPY
heading higher. As shown earlier in the year, this can keep going for a while if the sentiment behind it is strong enough.
- This isn't a bad area to take a small position given how one sided the pair can be, but I would much prefer to add to my position around 100 if it corrects to there. I expect it to finally hold on to this important psychological barrier.