The DJIA is a useful piece of fundamental data when evaluating the U.S. and the dollar. Although it is far from a perfect correlation, the Dow usually weakens when the dollar is strong and strengthens as the dollar weakens. The theory is that a cheaper USD makes U.S. products and services more attractive, thus helping the largest companies. When the global financial markets weaken - and it must weaken significantly to affect the top 30 in the DJIA - the USD begins to look like a safe haven for investment capital that has been pulled out of stocks, thus strengthening the USD. Whether you agree with the theory or not, many other institutional and independent traders watch the DJIA for hints on the future direction of the U.S. dollar.
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