Traders have almost gotten lazy these days when gauging the forex market because it is so highly correlated to global equity markets. In a typical day, we usually observe lock-step movement in the S&P 500 and EUR/USD. The corellation is even more exagerated when we're at the mercy of a news release or crisis event.
The correlation doesn't just stop at equity markets, the US Treausury market is inversley correlated (in terms of prices of bonds, not yields), and so is the US Dollar. Commodities also exhibit positive correlation to stocks.
Such close movements across markets haven't always been the norm. In fact, the cause of correlating markets is from a crisis-mentality among investors. When the US housing market was crashing, and Greek sovereign debt threw a wrench into the global recovery, investors switched into a mode of capital preservation (instead of looking for ways of appreciating their capital).
Put yourself into an investor's shoes, if you've got most of your assets in the stock market while it's tanking, where would you put it after taking it out? The default is to sell out of your stocks and buy Treasuries or US Dollar instead. When the green light is back on and positive headlines are streaming out of the news media, the process reverses, and the cycle continues.
But, if you've only been trading for the last 5, or even 10 years, you probably haven't experienced anything but crisis. So you probably haven't seen how a market behaves "normally."
