What Does the S&P Say About USD?

Even though the short term relationship between the US dollar and equities hasn’t been too strong as of late, it is still a powerful indicator to watch over the medium term. The S&P is facing some serious resistance at 1200 on both a technical and sentimental level. Remember that once the market fell below 1200 in 2008 it moved into the free fall that has taken the last year to recover from.

What we can say about this in reference to the dollar is that as long as the S&P stays below 1200 the dollar will continue to gain strength, especially against EUR. Above this mark however, the dollar will most weaken as investors become hungry for risk and seek out higher yields in their currency holdings.

Which brings us to AUDUSD. This pair has moved into the spot that EURUSD has in relation to equities. Australia is the highest yielding major currency, so look for new highs in the pair as the S&P breaks through resistance.

For more information about using equities to help trade Forex, read my article: A Guide to Intermarket Analysis Part 2: Equities.