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In the fast few weeks, the forex market has seen a correlation between the US dollar and the Japanese Yen. Whenever the dollar becomes stronger, the Yen beats everybody else, including the dollar. And vice versa.

Whenever the dollar weakens, like today, the Yen weakens even more.

Today, despite good data from the US, the dollar lost ground to the British Pound, the Euro and the Swiss Franc. But, it gained against the Japanese Yen.

Last week, the dollar made nice gains against all those European currencies, but weakened against the Yen. USD/JPY reached a 13 year low of 87.10.

This correlation happened in the past, a few months ago and is clearly seen recently.  

This makes the Yen crosses very promising. Today, the GBP/JPY made the sharpest move amongst all majors and crosses, gaining 2.66%, or 320 pips (at the time of writing).  

The second biggest gain was made by CHF/JPY (2.42%) and the third place was taken by EUR/JPY (2.24%).  

This shows how strong the correlation was today. Similar behavior occurred in the other direction last week, where the most lucrative positions were shorts on these crosses, all in favor of the Yen.

So, if this trend continues, Yen crosses are more favorable than the classic dollar currency pairs at this time.

I’ve previously written about another correlation – between the dollar and the pound, but this phenomenon has ceased. The USD JPY correlation seems stronger.