Euro/$USD Update

You can pretty much use the Euro or $USD updates very much like a market update, you just have to understand that the market normally moves in a risk on mode with the Euro, a weak Euro generally means a weak market.

The $USD has an inverse relationship with the market and most commodities so a strong dollar or a positive divergence in the dollar suggests the market will head down, a weak dollar suggests the market and commodities will head up. Oil right now is a bit disconnected because of event risk and the market overall is a bit out of sync with the normal correlation, it's one of the things that's been bothering me as far as the market moving much higher from here.

The charts below have good correlation among each other and with their natural correlation with the market divergences that are in place and for the most part, confirm the different timeframe trend expectations I laid out in last night's "The Week Ahead" post

 Euro short term or intraday charts are seeing deterioration, this is generally considered a near term market negative.

 2 min


 3 min

  The 5 min chart is still holding a little positive divergence from Friday-the short term charts negative stance hasn't migrated this far yet.

 The 15 min chart is in line with price action. Being the SPY 15 min is negative, it is easily understandable as the market has not seen the same downside the Euro has, nor the downside we'd expect to see from the FX/Equity correlation, I think they will meet up as stocks pullback and revert to the normal FX/Equity correlation.

 Interestingly though, like the market's longer term charts in which I explained the various trends last night, we have an hour and 4 hour positive divergence, again suggesting after we see a pullback, we still have more upside to go before a primary down trend re-asserts itself.

 4 hour

$USD (via UUP)

 As we see deterioration in the Euro short term charts, we'd expect to see some positive movement in the $USD short term charts (as the signals should be the opposite for confirmation) and we see that here on the 1 min as the afternoon wore on.

We have some negative movement in the 3 min $USD, which is not too far off the positive Euro 5 min still in place

 The $USD 5 min is still negative, much like the Euro 5 min is still positive. Short term this still suggests the market is not quite done and perhaps we are still heading for the gap from Friday.

 The 15 min $USD is positive in line just as the 15 min Euro is negative in line. This again supports the negative 15 min divergences in the market, all 3 confirm each other (market divergences and Euro/Dollar divergences); they all still point to a decent pullback move, this is why I wasn't too worried about watching AAPL closely for the best entry, I think it's close enough for the time I have to devote to watching it.

Interestingly, the Euro 60 min and 4 hour positive is met with a similar 1/4 hour negative in the $USD, which also matches the market divergences, so all in all, we have pretty good confirmation of the different trends I laid out in last night's post.