Any Clues Provided by the USD’s Large Losses Today?

As of right now the USD is down ~110 bps on the day.

Since March 2009 there have been 33 other occurrences of single-day USD declines of at least 100 bps.

The last instance dates all the way back to November, 11 of last year!

For most of 2009 and early 2010, in the early stages of the equity bull, these declines helped to juice risk assets and specifically the SPX as risk aversion from the 2008/2009 panic faded.

This can be seen at the areas (A) in the chart below.

Post Flash Crash during the summer 2010 Greece-induced sell-off of ~20%, such declines began to occur at or toward the top of multi-day SPX rallies at area (B) before the index then began selling again, as it generally worked to carve out a bottom that summer.

As the summer 2010 bottom was put in place and the market rallied in late 2010 similar single-day declines in the USD once again began to act as a facilitator to juice stocks higher at (C).

However, last summer and fall at (D), large declines in the USD once again started to occur at the top of blow-off, euphoria/headline driven SPX rallies. In fact, five of the past six such occasions have come at the top of such rallies.

We even had a 100+ bps decline in the USD on 7/21/11, which basically marked the precise top for the SPX before its early August mini-crash.

The latter bolded point is important as analytically, we generally have believed that late July is where we currently stand and more importantly, per this post, that we could see as high as ~1,350 on the SPX either this or next week before a hard break lower.

UPDATE – I updated the chart above to include the news on 7/21/11 that drove the USD lower by 100+ bps that day and the SPX higher into its ebullient top…Does it resemble today’s news flow out of Europe at all?

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