The Yen sits at multi-decade highs against the USD. The ratio of the DJ Global Index vs. the Nikkei the same (i.e., the former has outperformed the latter for quite some time).
Interestingly though, the Yen recently broke below trend-line support that had been in place since 2007, rallied back up to the under-side of that former support to test it as resistance, and appears to have failed that test.
One would think such a break-down and failure suggests more downside for the currency.
Which naturally begs the question – if the Yen’s epic multi-decade run is nearing an end (or purely taking a breather) what asset class(es) stand to out-perform possibly?
If you believe the chart below the answer is the Nikkei. That chart plots the same Yen/USD cross (black) against the ratio of the DJ Global Index vs. Nikkei.
Note how closely the two have tracked over time!
This suggests that any Yen weakness could translate into Nikkei out-performance vs. the RoW.
We’re not making a directional call, just a relative call.