Oil Bulls' Biggest Nightmare: A Stronger Dollar

Includes: DBO, OIL, USO
by: Bespoke Investment Group

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.