The dollar index was down more than 1 percent, and the dollar was falling against the euro, yen and sterling. Improving news out of Europe and a short squeeze are also combining to drive the euro more than a percent higher against the greenback, towards its highest levels since early May.

There was a little delay, but the positive correlation between the Euro the US stocks
remains in place.
The Euro ETF (FXE) bottomed on June 29 and SPY bottomed two days later. FXE surged in early July and SPY followed the Euro high the second week of July.

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EURUSD traded above 1.2700 but lacked the momentum to drive above the 1.2800 level. Part of the reason for the restrained market activity may be the EU Bank Stress test results expected to be released next Friday. While some say the release will be good for risk-correlated trades due to the high level of transparency – we believe this may only be the case if the anticipated cost of recapitalizing…