European debt crisis once again attracted the attention of investors, however, ushered in earnings season with the U.S. stock market's focus will be transferred more or less. We know that the currency markets the dollar is the backbone, while the U.S. dollar and the U.S. economies are intertwined, just the U.S. stock market is a barometer of the U.S. economy. Therefore, the trend of U.S. stocks (especially the current trend), for determining the overall trend of the dollar and the foreign exchange market significance.
In general, the U.S. dollar and U.S. stocks was a negative correlation. Why? It simply is about the risk appetite of investors. Relevance of traditional market logic is simple: the better in the global economy, the relatively high return on investment in emerging markets generally, the money tends to flow from the United States, especially from bonds and money market outflows, and then flows into the stock market , commodities and other markets.
In such flows, the bond prices then fell, stocks and commodities are higher, the dollar because of capital outflows from the United States fell. Conversely, turbulent time in the world, market participants tend to hedge the risk of funds from emerging markets to repatriate the United States, the stock market, commodity prices, the dollar and bonds increased.
Theory may appear pale and weak, let the data speak for themselves, on the relevance of the dollar and the stock market, the following chart compares the dollar index and the Dow Jones index of changes in the last 10 years. We can see from the chart, in the past most of the period, the U.S. did with the stock market has a tendency to reverse the trend.