The dollar index (DXY), which was well-correlated with the S&P for much of last year, but isn’t any more.

The April FOMC meeting was more neutral, as the S&P peaked again, but 10Y treasury yields couldn’t break through 2%, 10Y TIIPs couldn’t break through 30bps and the dollar barely got a lift at all.

While the S&P and the dollar were positively correlated, that period when the Fed was ‘not concerned’ coincided with times when the market looked for Fed tightening and was bullish of the dollar.

The Fed’s ‘concern’ in March, when the equity market was rallying, swung sentiment away from a rate hike any time soon and undermined the dollar, even as the equity market went on rallying.

Cue firstly, the slide in the DXY index to break (temporarily, so far) the bottom of its range. And then, we’ve seen equities roll over and global markets sell off.

Over long periods of time, the correlation between the dollar and the S&P 500 is almost zero.

What a dollar bear needs, more than a falling S&P, is the combination falling/low real yields, and falling/low volatility.

From current levels (high equity multiples, very low real yields, very low volatility) it’s going to be hard enough to maintain such friendly conditions for a dollar bear, let alone improve them further, which is really a way of saying that once the position unwind is over, the bears will be flushed out by either increased asset market volatility or by renewed expectations of Fed tightening (and higher real yields).

We are short USD/CAD in mid month futures, and short NZD/USD reflects growth outlook.

We’re adding a short GBP/USD trade today as we slowly build dollar longs into the weakness.

While, initiate diagonal short put ladders in USD/JPY using narrow strikes (109.035/106.884/111.063) and 1M/1W and expiries.

Go short in EUR/USD 3M ATM vs Buy EUR/USD 6M ATM -1.5 vol.