Paying attention to changes within correlations can often be extremely insightful and useful as a mechanism to anticipate future directional shifts. On Wednesday we noticed that despite the impressive moves in currencies against the Greenback, the risk gauging yen cross rates failed to materially participate, with most of these crosses closing lower on the day. We thought this was unusual and definitely worth highlighting with the diverging price action potentially warning of a shift in the current trends (Eur/Usd and Eur/Jpy hold a +0.70 positive correlation since January 2009). Today, we are starting to see this follow through, with all of the major currencies, with the exception of the Yen (trades flat), tracking lower against the buck.
