Dow implying 300 decline
Stocks have continued to slide in pre-market trade and the Pavlovian reaction seems to support the EURUSD (weaken the USD). The EURUSD is looking to test the Asian session high at 1.12189. That is where the 50% retracement of the move down from the June high comes in as well the 100 day MA is not far at 1.21268 and the 200 bar MA on the 4-hour is at 1.1233. Three levels lined up at successively higher levels. They should attract some selling (especially the 100 day MA).
The low today (from the London morning session) reached down to the underside of a broken trend line at 1.1177 and bounced.
At the EURUSD’s lows today, the e-mini stocks were higher then in premarket trading, but starting their move back lower. That seemed to reverse the EURUSD near the same time
The below chart is e-mini. As the price started to move lower….
… the EURUSD started to run back higher.
As mentioned that seems to be the Pavlovian reaction by the market (ring the bell for a run in stocks and the EURUSD reacts the opposite direction).
Now correlation is a tricky thing. What happens if European stocks tumble too? But the price action can latch onto a theme and trade it for a while at least. I still think it is important to pay attention to the technical levels on the the instrument you are trading.
The EURUSD moves to test the 100 day MA as stocks open sharply lower. Will the sellers lean?