By all means, can anyone explain to me this strong second by second correlation between the Dow Jones industrial avaerage and the Forex currencies? I spent countleass hours trying to find why EURUSD goes up at the same instant Dow does and why USD goes in the opposite direction. I know how to take advantage of this but I realy do not know exactly why this happens, I just prepared a SPAM LINK telling the avaerage trader how to use this corrlation to his advantage but what I need to know is why this happens.
This happens, at the moment, because both are instruments strongly affected by the underlying currents of risk aversion/flight-to-quality.
Higher EURUS means a weaker dollar vis-a-vis the euro does it not? Maybe the correlation is so strong lately because foreigners understand any gains in the DOW at this point are offset by quantitative easing (money printing) by the Fed? Sure, the credit money supply is being destroyed faster than the Fed can create dollars, but American productivity potential is being destroyed alongside the credit destruction whereas little productivity is created by Fed money creation, so the net effect is dilutive for currency and bullish for equities.