EURUSD “Risk on / Risk off” correlation has changed a few times over the last 2 decades.
Currently and until the end of the year I see this correlation to remain negative – it could change after Oct15.
Game Plan this year: Until Mid Apr15: I see a 5% equity correction during which EURUSD could jump to 1.1300 (risky Leg). From Mid Apr15 to Oct15: I see a resumption of the equity rally that could lead EURUSD to test 1.0000. Year end: I see equity entering a fragile configuration and EURUSD could squeeze hard towards 1.2000. 2016: if 1.2000 is reached, it might be a short again for other reasons (correlation could change again by then). We will have time to review the situation.
Long Term Over the next 3years, the USD index is showing a strong pattern. If there is follow through after a few quarters of consolidation, although it is difficult to imagine right now, the pre plaza accord dynamics may repeat.