The US Dow Jones Industrials Average opened the week a good deal above long-term support levels, but a substantial decline threatens to take the Dow to fresh lows through upcoming trade. Currency trading markets have felt the fresh Dow losses in the form of US Dollar and Japanese Yen gains, as we see both the USD and JPY rallying against all G10 counterparts. The chart below shows that a break of said Dow Jones would likely eye a move towards subsequent spike-lows closer to the 7,500 mark. Such a tumble could prove disastrous for broader risk sentiment, and a flight to safety could produce sharp Japanese Yen and US Dollar strength. The next several days of US Dow Jones price action could prove critical for global equity markets and forex markets alike—especially as theJapanese Yen and Dow correlation remains at record-highs.
Written by David Rodríguez, Quantitative Analyst for DailyFX.com