The euroyen cross has served as my faithful lapdog for 20 years, accurately forecasting the global risk appetite, rising when hedge funds were eager to roll the dice, and retreating when they went into hiding (see my earlier work by clicking here ). But lately this pet has forgotten its house training, much to the delight of my dry cleaner, delivering an unpleasant stream of false signals. When Japanese overnight rates were at zero, and the rest of the world was at 5%, it was easy to let Japan be your piggy bank and finance everything for free by denominating your debt in yen. This carry trade of choice became a strategy on its own. Leverage it ten to one and you earned a handy 50% annual return, and more, if the yen then depreciated. The problem is that the rest of the world has become Japan, with overnight rates everywhere at, or converging on zero, sending the predictive value of euroyen down the toilet. Thus, it joins the dustbin of history with other indicators that drew our collective gazes, like the money supply, the trade deficit, and rail car loadings. If I find a new one, I’ll let you know. Does anyone out there have any suggestions?