We have been writing about cross market correlations all morning and feel that the latest pullback in equities is significant given the strong correlation to currencies and particularly the Eur/Usd rate.
A potential bearish weekly reversal is now taking form in both the S&P and DJIA after Monday’s sharp pullback resulted in a break of 6 consecutive weekly higher lows. This suggests that the recent equity rally is indeed only a bear market rally and that we could be looking to put in a fresh lower high ahead of the next major pullback. Any sign of additional weakness in US equities should weigh heavily on the Euro with FX market participants once again likely to buy back into the safe-haven greenback.
NDICATOR OF THE DAY" - CROSS MARKET CORRELATIONS
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