DJI (Dow Jones) positively correlated with EURUSD? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

US30 - DJI analysis June 2021 0 replies

Looking for a broker to trade US30, DJI, DAX, NSDAQ etc. 3 replies

EUR/USD / DJI / Oil 2 replies

macd divergence on DJI - The Bottom? 8 replies

Request: DJI and others old back history 1 reply

DJI (Dow Jones) positively correlated with EURUSD?

  • #1
  • First Post: Nov 28, 2010 12:01pm Nov 28, 2010 12:01pm
Hi,
I have noticed that the DJI (Dow Jones Industrial Average) has a positive correlation with EURUSD. DJI is traded on American markets (NYSE).

Logically I would assume that if the U.S stock market goes up, the USD should go up also because improving stock markets lead to foreign investments (which require conversion to USD).

So why then does the dollar fall when DJI goes up?

Does it have something to do with hedging by big players?
  • #2
  • Edited 12:26pm Nov 28, 2010 12:11pm | Edited 12:26pm
I have a very simple view. I am not a great writer, but check out these two previous posts.

http://www.forexfactory.com/showpost...26&postcount=2

and

http://www.forexfactory.com/showpost...81&postcount=3

Essentially, dollars are being sold (exchanged) for stocks when stocks are rising and people are buying. Dollars decline slightly, while stock prices increase. Dollar declines then Euro rises based upon the EUR/USD pairing. Opposite for down stock market days, money flows out of stocks and buys (or is exchanged for) dollars.

News and current events can 'tweak' that correlation though.
Nov. 24th was an example, the stock indices were positive, but EUR/USD was down.

Just trying to help.
Good Luck!
  • #3
  • Nov 28, 2010 12:40pm Nov 28, 2010 12:40pm
Very interesting...that sheds a lot of light on it.
  • #4
  • Mar 5, 2020 6:51am Mar 5, 2020 6:51am
Logically when EurUsd pair falls, then Dollar goes stronger. If US economy rise, that means EurUsd pair is on downtrend. That means you get fewer dollars if you are changing them, using euros. Ill hope u get it, sry for my bad english.

Gl!
Stockston
  • #5
  • Mar 5, 2020 12:02pm Mar 5, 2020 12:02pm
Quoting Stockston
Logically when EurUsd pair falls, then Dollar goes stronger. If US economy rise, that means EurUsd pair is on downtrend. That means you get fewer dollars if you are changing them, using euros. Ill hope u get it, sry for my bad english. Gl! Stockston
I guess it's not so simple, stocks may rise when the Fed cuts interest rate, means opportunity costs of holding cash increase what motivates people to buy stocks and ditch cash (i.e. USD). This causes dollar weakness including weakness against other currencies. But I guess it's not so simple.
  • #6
  • Mar 8, 2020 6:50am Mar 8, 2020 6:50am
Quoting mfurlend
So why then does the dollar fall when DJI goes up?
we don't always know which is cause and which is effect.
but I'd also reason like this: if a country's currency gets weaker, i. e. it has less buying power, prices need to rise nominally. so dow jones would go up if dollar is getting weaker, even if nothing else changes (fundamentally). which of course would only be one factor among many others. but i think this would be a mathematically strict (cor)relation... if nothing in an economy changes but by some magical event over night the money supply would double nominally (e.g. instead of x billion $ there would suddenly exist 2x billion $), then prices for everything should also double
  • #7
  • Mar 8, 2020 10:52pm Mar 8, 2020 10:52pm
Quoting mfurlend
Hi, I have noticed that the DJI (Dow Jones Industrial Average) has a positive correlation with EURUSD. DJI is traded on American markets (NYSE). Logically I would assume that if the U.S stock market goes up, the USD should go up also because improving stock markets lead to foreign investments (which require conversion to USD). So why then does the dollar fall when DJI goes up? Does it have something to do with hedging by big players?
Obviously the prices are illusory then, only the trading-profits booked in cash are real. Many stocks are truly worthless and will never be worth significant profits, shareholders don't realize until absolute insolvency strikes and there are hundreds of stocks with billion dollar market caps that are truly worthless, the debt burden makes the stock worthless.

DJIA goes up, Europeans take profits from IT, convert into Euro which goes sends the price up.
DJIA bought from those denominating in USD, DJIA goes up, USD supply hits market which drops USD/JPY while raising EUR/USD, this is indicative of how the market operates.
Count Of Antwerp
  • #8
  • Last Post: Jun 23, 2021 8:59am Jun 23, 2021 8:59am
I use exclusivemarkets to trade INDEX (DJW/NASQ/ S&P500 the advantage

if you interested to try please use my link https://account.exclusivemarkets.com...r?ibid=1290606
# low seperate
# low margin (DJI 0.01 = 0.68)
#https://account.exclusivemarkets.com...r?ibid=1290606
0 traders viewing now