AUDUSD pair and what it means to the markets

To see Oct 26 market review click here.

I want to show a graph of the correlation between S&P 500 and the AUDUSD pair. 

From this it is pretty clear that they are highly correlated.  The way this currency pair works is that you would buy AUD and sell USD.  So if the AUD becomes more valued versus the USD the price goes up.  If there is strength in the dollar for example, the price will decline.

Below is the Currency pair and look at how the price action mirrors the current S&P 500.

The was a VERY strong break down today.  This was due to Australian CPI information that came out, see Article.  As I am not a forex trader and just began to look into currency pairs because of the currency war brewing, I will point to this article that explains the drop in the pair, see Article.  Basically a CPI of 0.6% vs a 0.7% expectation resulted in a quick reversal that started at 8:35 pm EST.

Great thing about techincals is that the analysis is the same for any chart pattern.  We have momentum from MACD and slow stoch pointing down, a cross on the AXR, the DI- crossed above the DI+ which is a bearish cross over and to finish it all off we broke the 20 day MA.

This, therefore, based on the correlation should imply a drop in the S&P 500 tomorrow.  The reasoning is obviously the correlation as demonstrated above but it is the strengthening of the dollar that was pointed to in the previous post (Oct 26).

The Asian markets also at this time had a sharp sell off on the strengthening of the USD in addition the Future market has priced in a 5 point drop so far in the S&P 500 tomorrow.
Stay tuned....