The US Dollar is likely to see gains in the days and weeks ahead as stock markets reverse lower, boosting demand for the safety-linked currency. The Dow Jones Industrial Average looks to have broken support at the neckline of a Head and Shoulders topping chart formation, hinting a bearish reversal is ahead:
Dow Jones Industrial Average (daily)
The Dow is closely correlated to most of the major currency pairs, with the high-yielding and commodity-linked currencies naturally showing the strongest relationships because of their inherent connection to trends in risky assets. The correlations to EURUSD and GBPUSD are also substantial:
DJIA vs. FX Majors (90-day Rolling Corr)
