S&P 500 and Dow Jones indexes drive the EUR/USD rates down

Professional FX traders understand the S&P 500 and Dow Jones indexes influence the EUR/USD trading pair, and the correlation is strong and dynamic. When the US equity market is on the rise, traders expect more US dollars invested in the sector. This said, such inflows increase the US dollar rates. When the market decline is observed, USD is losing momentum.

On July 16, the EUR/USD trading pair reached its minimum since March 30. Since May 25, the EUR/USD price has lost 3.3% of its value, reaching 1.18. According to the technical analysis, traders are going to sell more Euros for US dollars, as they expect a further decline in EUR prices.

What are the reasons for such a tendency? S&P 500 and Dow Jones indexes undergo the Renaissance after the pandemic-related declines. For instance, the S&P 500 index has skyrocketed by 17.8% in 2021, and the Dow Jones index growth is 15.7%. This said, the US equity market increase growth entails powerful inflows that drive the US dollar price higher.

Furthermore, both indexes have recently reached their all-time highs, making the market promising for newer investors. The EUR/USD pair is allegedly about to continue its move towards the USD strengthening.