Those Who Have Eyes Can See

Putting an Epic Fail tag on this post because flip it upside down, and then yen has experienced an epic trendline failure. The move is driven by inflation and rising bond yields, since Japan has the most government debt and is among the nations most at risk from global rising rates. Sure enough, USDJPY tracks rather well with the 10-year yield. Not perfect, but clearly two assets trending in the same direction for decades.

Correlations are not set in stone. They can break at any time. They sometimes become wider before narrowing as well. The correlation was broken for much of the mid-1990s, a lifetime for a financial market cycle. Still, the break in USDJPY went through a 40-year resistance line. The mother of all trendlines is the downtrend in bond yields going back to the early 1980s peak. The yen is screaming caution here, or for bears, you are not nearly bearish enough.