1. After taking a beating over the last 3 weeks against the EUR, the dollar seems firmer today. EUR/USD had gained close to 10% in three weeks, which is huge in the forex market. EUR/USD is trading at the lows of today, and the next 12 hours will decide on whether this is a retreat in EUR/USD. It has been trading range bound for the last 6 hours (very dull). A head fake is not to be excluded (head fake here means a move up before a real retreat).
We anticipate a possible down move in EUR/USD that might get under way between 1:30PM and 3:00PM.
2. EUR/USD and the stock market are generally correlated. The last week, we saw something unusual. The stock market trading weaker/range bound, and the dollar taking a beating. This is not good for American stock market investors.
3. Today the stock market moved lower (probably to reflect the down move in EUR/USD). If EUR/USD weakens, this will be a real test for the stock market. If it goes up while EUR/USD goes down, then that would be a good sign for stock earnings.
4. Conclusion: the next few days are important to ascertain some conclusions on stock market and the US dollar.
5. The stock market is entering the earnings period. This is very important for stock options. We shall come back to this item in future posts (probably the next post).
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