Why Did EUR/JPY Hit a Record High?

[DailyFx]

The Euro hit a record high against the Japanese Yen in the early US trading session.



The primary reason why the currency pair has rallied 11 percent over the past 3.5 months is because of US growth - not many people realize that the price action of EUR/JPY is directly correlated with how the US economy is faring. According to this EUR/JPY chart, there is a strong correlation between manufacturing ISM and EUR/JPY. The arrows on the chart point to the times when manufacturing ISM had a meaningful dip below the 50 boom / bust level. This has happened more than 7 times over the past 20 years and each time the US manufacturing sector contracted, EUR/JPY rallied. On average, from the month that ISM contracted to the month that ISM moved back above 50, EUR/JPY rallied 314 pips.