My friend and trading Guru Rob Booker posted an interesting “quick-and-dirty” look at the correlation between EUR/JPY and the Dow. Money flows into EUR/JPY seem to be influenced heavily by the attitude traders have toward risk since JPY is the preferred currency to pit carry trades against. Boris Schlossberg from FXCM and DailyFX.com regularly points out how a falling Dow can drag down EUR/JPY and Rob’s research seems to support that claim.

“For 2007, it seems that the Dow and the EUR/JPY have a Correlation Coefficient of 83%.
-Rob Booker”

EUR/USD traders can consider this correlation to filter potential positions because in my experience EUR/USD tends to fall shortly after EUR/JPY is dragged down although I don’t have a fancy graph like Rob has to prove it tonight!

Just one more thing to keep in the back of your mind when planning trades on EUR based pairs.

To view Rob’s data in detail and read his entire post, click here.

-Ryan