Why it matters where the Dow goes next.
Forex traders do need to keep an eye on what's going on in the equities. And while most traders look at the S&P 500 for an idea of what stocks are doing, I take a slightly different tact. To me the read on equities is about risk aversion or risk appetite. Sure I'm looking for support and resistance but I'm really after the psychology of where people are putting their money and whether their looking for high return while assuming risk or safety.
I think the Dow is the best barometer for that.
Also consider that there still a good push-pull between the Dow and the dollar. Of course it's the dollar that effects the majors: EUR/USD, USD/JPY, GBP/USD, and even the USD/CHF.
As the Asian session is underway and the "Greek Tragedy" and ECB response (or lack of it) is still being digested, the Dow futures are down 16. The funny thing about the EUR/USD mid-morning bounce today is that when has a bailout strengthened a currency. That maybe what traders are asking themselves now too.
With the intraday EUR/USD at resistance at the Dow Jones stalling around the 10,150 psychological level, my current positions are based upon both these two markets heading lower off resistance and the U.S. Dollar -- in turn -- heading higher.
- the Queen
Related Posts:
- Where's the U.S. Dollar heading next? Ask the Dow. 07:52 03 November 2009
- A look at the EUR/JPY and its equities correlation 12:03 21 April 2010
- Dissecting the USD/JPY Daily Swing Set Up 13:01 11 January 2010
- What does today's dollar continuation mean? 21:35 18 February 2010
- Your time frame IS your outlook. A view of the U.S. Dollar Index 18:13 21 July 2009
Archived Comments (1)
Forex Blog: Chartology
basically, the Dow and USD are correlated.
whe dow moves up, so does USD pairs, right ? but in EUR/USD, where SUD is the quote currency, this pair moves down. Am I correct?