USD/EUR vs. Italy-German 10-year Spread

Italy is still a MAJOR concern for the eurozone; Italian bond spreads relative to Germany are off their highs (327 basis points) and down to 281 basis points (by no means out of the woods).  Note the tacit correlation between euro and spread direction. Below, the pair is shown as USD/EUR so you can see the visual correlation better; i.e. as the spread widens the euro weakens against the US dollar and vice versa. Spread bet anyone?

120318 euro italy spread.png


US Dollar Index Versus Oil Weekly View

Below is a look at the US dollar versus Oil.  We have been wrong on oil.  And it now appears a major top is in place at Wave A.  We are expecting the old correlation of strong dollar-weak oil, and vice versa, again.  To that belief, a correction lower in the dollar over the next several weeks (months) would coincide nicely with a much “overdue” correction higher in oil—labeled Wave [b].

112518 oil vs dollar.png