I had a very boring nothing-doing column written early today before the dollar broke hard. So a quick change of plan. EUR/JPY just now knocked on the door of our massive 157.65-85 5-level deep Fib zone with a 157.62 high.

Something very interesting is developing in here. If you look at the relative location of both the equity markets and carry trades in terms of their current, deep retracements from the meltdown, you will notice that both are at either .618 or .786 retracement from the highs. In the last several weeks, there has been a strong, direct correlation between equities and carry trades, since they both begin volatility explosion on February 27. Just now, as the carry trades exploded higher, the equity markets did nothing. This is the first time in over two weeks we have seen the correlation fall apart like this. One of two things could be happening. Either the correlation play is over, or the equity markets are signaling to us they are about to turn over and head back for another shot at the lows, which will bring the yen carry trades with them. I am on the EUR/JPY offer at 157.75,85,95 with 158.05 stops. There was no USD/JPY short entry last night.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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