An interesting correlation has developed between EUR/USD and the Dow Jones Industrial in recent weeks. Both the currency markets and equity markets have been extremely sensitive to any economic data that provides insight into the Fed's Aug 9 move. Data suggesting the Fed is done sees the stock market rally as hard as the dollar sells off. This has produced the positive correlation between EUR/USD and the Dow, or in other words, an inverse correlation between the dollar and the Dow. Interestingly, both the EUR/USD and Dow are at critical resistance levels; EUR/USD 1.2780 and Dow 11,250. Should either give way on a sustained basis, we might have a jump on the short term direction of the other. This positive correlation between the two markets should hold only as long as the markets continue to react so deliberately and predictably to interest rate-related data. After the August 9 Fed meeting, we should have a clearer US interest rate outlook and the correlation will likely falter.

A look at the daily EUR/USD technicals shows a pair of Fib resistance levels at 1.2780 aligning with daily downtrend resistance all below 1.2800. This says that price should not close above 1.2800 while the US stock market sells off in response to a â�,��"one and doneâ�,� rate hike on August 9.

For tonight, let's look to be short EURSUD between 1.2765-85 with stops above 1.2805 targeting 1.2735 on partials.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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