Going back several weeks, I had been looking for a pause in the too-hot-to-handle Euro. Recall that when the Euro is strong versus the U.S. Dollar and Japanese Yen, global risk appetite tends to bode well, namely stocks. This correlation is not always tight. But, for example, last New Year’s Eve the bears were foolish not to take the relative strength in the Euro into account, when they predicted U.S. markets would swoon.
Currently, the Euro has been basing sideways, or flagging high and tight, since my original blog post. Stocks themselves are not far from recent highs. I am mainly looking to see whether this Euro consolidation remains tight, as opposed to loose and sloppy price action, in the coming weeks, which increases the odds for another push higher.