Dollar-selling is the chief characteristic of the latest ‘risk off’ move. The old correlation (euro weakness) isn’t working because the market is so sensitive to QE3 expectations with the latest estimates putting the chance of action at the September FOMC meeting at 30-50%.
EUR/USD and cable are rising despite the worries but that could change if European stocks and periphery bonds slip into the close.
USD/CAD has been highly correlated to stocks for the past three months and the pair has now risen above 0.9900 (albeit fractionally) clearing a stubborn resistance level, and forming a minor inverted head and shoulders bottom, targeting 0.9940. Offers kick in at 0.9925.
