Good morning folks - we are now in day (?) of this seemingly never-ending grind higher. The Nikkei has ended the week firmly in the red, -2.7% but stocks here seem defiant. From a technical standpoint though, it is hard to view the rally off the June lows as anything but a correction and corrections can often times be tough to time. Regardless, there is decent resistance seen at the 1100/05 area so we will just need to be patient.

If part correlations are still intact and valid, the interest rate markets tell us that stocks are ready to play catch-up to the downside.

Here are my thoughts:

The dollar based pairs are tricky in here - we have all seen the seemingly unpredictable moves in recent sessions and with DXC not able to find support - it is time to turn to non-dollar based pairs for ideas.

Historically speaking, when volatility picks up and equity prices decline (which is still my forecast) EUR will usually rally. But will longs in EUR/USD be the most suitable choice?

If you look at the EUR vs a broad basket of currencies, i.e. EUR/Broad Index (not available on most charting packages so no need to inquire as to where to find it) it is testing the 55-day ema and looking to break higher. It’s been below the 55-ema for over 150 consecutive trading sessions, you have to go back over 10-years to find anything comparable to this. (Granted, the recent crisis in Europe [Greece, Spain etc..] needs to be factored in.)

So, I have a few ideas on a EUR cross to play in order for us to take advantage of this potential development. I will keep clients posted to this potential NEW TRADE ALERT and will follow-up with a post shortly that goes into more detail the logic behind this idea with charts and correlations.

For more from Dave, visit Aspen Trading for more updates.