Good day koalas.
We last visited the correlation between the EUR/USD and S&P 500 in Jan 10. In the previous report, we saw a month of disconnect as the year end Dec 09 brought about a stray away from the usual.
It has been two months since and it is time for another look.
Find below the charts of the EUR/USD and S&P 500 for the month of Jan – Mar 10.
In the month of Feb 10, we began to observe a shift from the risk aversion theme of trading.
While we know that the US Dollar is probably still strengthening during times of uncertainty due to the perception of it’s “safe haven” status, the S&P 500 seems to have decided on a path of it’s own.
Starting from Feb 10, the US begins to enjoy a period of apparent positivity. In about a month and half, the S&P 500 had recovered from it’s previous drop and is now making new highs. It is interesting that this is happening as the US is still mired by problems such as a high unemployment rate.
While we may still see reminiscences of the correlation between the two financial instrument, for example the risk aversion last week affected both, it is not stable enough for the role of being a clue to possible momentum.
One point to note is that if the correlation is to return one day, one of the financial instrument will have a lot of catching up to play.