Oil Bulls' Biggest Nightmare: A Stronger Dollar 17 comments
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While it is way too early to say that yesterday's rally in the dollar is the start of any real change in trend, it did give some insight to what investors can expect in commodities and oil if the dollar were to actually start going up. In the chart below, we charted oil with the US Dollar index (inverted) over the last three years. While the magnitude of the moves in each asset have differed, the tit for tat relationship between the two has been constant.
While daily 'reasons' for the dollar's move are usually attributed to tensions abroad, refinery utilization rates, inventory reports, etc, investors may be better served looking at the direction of the dollar and paying more attention to what the Fed intends to do with interest rates.
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This article has 17 comments:
But the price of oil will not only push down the dollar, but the Euro as well. The Euro/Dollar trade is the biggest bubble ever. I am here in Europe, and I fail to see what is so appealing about the Eurozone.
We have a lot of public and private deficits, just like the United States.
We import a lot of Energy, just like the United States. The Russians have Europe by the balls, energy-wise, I mean. And the Europeans don't have the military leverage, unlike the United States, to back up their Energy demand. And on top of that Europe is a demographic disaster.
While i am sure that with every Dollar rally, folks will take a couple of bucks off the price of oil, this doesn't change the supply and demand picture of oil.
That is why I don't invest in oil itself, but in the service companies.
My Picks: RIG, NE, SLB, HAL
No, it will accelerate...it would mean a stronger economy in the US and added pressure on commodities....especia... the AG softs where the local currencies would see greater prices for food.
The dollar rose and oil did too...someone unwound and others followed...and converted into dollars...big deal.
Your short term correction in oil lasted exactly one day. Oil and gold are both up today whilel the USD is weakening again after a disastrous U of Mich consumer sentiment survey.
Oilnewby
It is ALL manipulated now. The PPT has its fingers into ALL market, tipping over TA dominoes in commodities (gold and silver mainly, but on certain days ALL commodities) and buying enough futures in the DOW to break thru resistance levels to create contrived "rallies"...often Hail Mary rallies at the end of the market day. But their main intervention has been in the gold and silver markets...the true monitor of the value (or more accurately the worthlessness) of our fiat currency. There is no "strong" dollar...just suppression of the prices of gold and silver...and mainly on the COMEX, aided by the Fed's/the Cartel's co-players/co-conspira... on the London exchange and the TOCOM (Tokyo). The rest is just talk based on the lies of the MSM.
The markets have become total interventions...and for the benefit of whom? NOT YOU OR ME!!!...but for TPTB...the Fed and the other intl bankers. They love their "printing press" and the fact that they can pay for and manipulate all markets with their funny money, AND THEN GET PAID INTEREST ON THE MONEY THEY JUST CREATED...interest that WE PAY!!!!
Commodities are going up in terms of the dollar for two basic reasons: First of all, oil, NG, gold, silver, copper, wheat CANNOT BE CREATED ON A PRINTING PRESS OR OUT OF THIN AIR and demand for them continue to increase, esp from the BRIC countries, and even here in the US, where driving patterns have barely changed even with the rising gas prices!! Secondly, dollars CAN be!!!...ie, the more that are created, the less each is worth, the more there are chasing FINITE commodities. It IS very simple economic logic.
Don't believe the twisted lies and rhetoric coming from the MSM...esp coming from the mainstream commodities and financial media...it is worse Governmentspeak than ever was in Pravda...and would have done Orwell proud (in a sick sort of way). Do your own research...don't think you know a thing if your main source of information is the MSM.
jt
It is a succulent irony that professional economists, (those who confuse the supply of money with the supply of loan-funds), thus conclude that increases in the old monetary figure “M3” are inflationary. The conclusion is tantamount to saying, “don’t save money” as savings (which we don’t have enough of) adds to “M3” and therefore has an inflationary bias, when in fact, savings (a large portion of “M3”) is evidence of money that has already been spent/invested. Savings-investment accounts have been lumped into the Keynesian inspired concept of money (just as are MMF funds).
Depending upon the anticipation of the move, the range could be between the FOMC meeting - Apr. 29/30 & May 5th.
Meanwhile, Gold is oversold and the SPX is overbought...
The Fed will be commited to fight inflation and surprise the market with no cut !!!
Result... Dollar up....Oil down....SPX down.....
Fed will have a chance to fight inflation and leave fed funds rate at 2.25 and surprise the bulls.
Result Oil down....Stocks down.....Dollar up....
And I call it savings for retirement...lol
quote
It is ALL manipulated now. The PPT has its fingers into ALL market, tipping over TA dominoes in commodities (gold and silver mainly, but on certain days ALL commodities) and buying enough futures in the DOW to break thru resistance levels to create contrived "rallies"...often Hail Mary rallies at the end of the market day. But their main intervention has been in the gold and silver markets...the true monitor of the value (or more accurately the worthlessness) of our fiat currency. There is no "strong" dollar...just suppression of the prices of gold and silver...and mainly on the COMEX, aided by the Fed's/the Cartel's co-players/co-conspira... on the London exchange and the TOCOM (Tokyo). The rest is just talk based on the lies of the MSM.
unquote
I have often read this sort of commentary elsewhere, and anyone who follows market action intraday must have noticed all of the activities mentioned by JT; end of day rallies, persistent support around critical levels of the indicies etc.. I understand JP's disillusionment with govt; I guess we all are, and powerless to do anything about it. But why is he upset the market is being artificially supported? Good stock picking still earns you a return above the index, whilst articifical support of indicies prevents 1929-like occurences. The dollar? sure, it's weak. But 10 years ago the euro was 80 US cents, and if you look at various currency relationships over 50 years or so, they appear to have very long cycles of strength and weakness relative to each other; it's true particularly with the majors such as the yen, sterling, and the euro (using the DM as a proxy prior to the euro). Overall its true that all currencies are losing value but that's not the work of one central bank alone.