Crude Oil Trading on the Dollar
October 26th, 2009 Posted in Oil and Precious Metals
Crude oil prices did a 180 degree turn today as the price of the commodity rose during most of the European trading hours, only to violently drop upon entering the New York trading session. Triggering the downfall in the price was a slide in U.S. equities and the rising dollar.
The price of crude oil rose to a high of $81.58 before dropping below $80 and is currently trading at $78.65, or -1.4%. Causing the fall was the Dow Jones Industrial Averages shedding close to1% today. The greenback rallied on the poor performance in the stock market, while the EUR/USD dropped below the psychological 1.5000 and held its position significantly under this level. The pair now stands at 1.4852 after opening the day at 1.5037 for a change of 1.2%.
Crude oil prices have been closely tracking the performance of the dollar and U.S. equity markets, rising when the dollar falls, and falling when the dollar rises. The commodity has relatively ignored fundamental data that normally affects the commodity’s price.
The dollar and equities linked trading with crude oil has been the dominant trend successful traders have followed of the course of the past two months. The negative correlation began when the dollar started to weaken amid the improving global economy. The commodity crossed the $80 threshold on Wednesday but has been unable to hold a consistent footing above this resistance line.
This pullback in the price may be overdue, but should not prevent crude oil from further strengthening and making another attempt to cross the $80 price level. As Wall Street’s earning season comes to a close, the price of crude oil could be trading in a range of $82-$85.
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Tags: Commodities Trading, Crude Oil, dollar, Forex Trading
