NEW YORK ( ETF Expert) -- The United States of America is frequently credited with being the largest economy in the world. Indeed, the U.S. produces the greatest market value of final goods and services per year.On the other hand, when an economy is not defined by national borders, the European Union can be credited with the largest Gross Domestic Product. It is this fact that financial markets may have been underestimating since July 26. Roughly one month ago, the president of the European Central Bank famously stated that policymakers will "do whatever it takes to preserve the euro." In fact, since Mario Draghi strongly hinted the ECB would be able to buy bonds in the way Ben Bernanke's Federal Reserve has done with its quantitative easing, both the CurrencyShares Euro Trust ( FXE) as well as Vanguard Europe ( VGK) have soared.
In truth, CurrencyShares Euro Trust has been faltering at the resistance of its 100-day intermediate-term trendline. If FXE stumbles at its 100-day yet again, it might be reasonable to assume that investors fear systemic risk for the financial system as well as ongoing economic hardship for the globe's largest economy. Developed world and emerging-markets stocks would retreat. PowerShares Dollar Bullish ( UUP) also depicts the likelihood of potential risk aversion. Not since the "sell-in-May" swoon have we witnessed a mad dash to own the greenback. If the current price of UUP hangs around its intermediate-term moving average instead of moving lower, investors may lose faith in the resolve of a "united" euro zone.
Keep in mind, an investor who wishes to hedge against ownership of world equities might want to purchase UUP. Over the last six months, UUP has moved in the opposite direction of the iShares All-Country World Index Fund ( ACWI) 80% of the time. This article was written by an independent contributor, separate from TheStreet's regular news coverage.