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Crude Oil & the Dollar Print
Written by Site admin   
Sunday, 29 January 2017 19:44

Crude Oil and the US Dollar have a long term correlation, it's inverse, so as the Dollar goes up, Oil goes down.

Since Trumps election we've had a break out and bull run in the Dollar and, if as seems likely, there will be a series of US interest rate rises this year, there's more strength to come. So, if the correlation is inverse and the Dollar rises, Crude Oil should fall, right?

WTIDXYJan17

On this chart I inverted the DXY, in red, so withe the correlation they should both be running in the same direction. Problem is, the correlation broke last May. Since then they've moved opposite the long term correlation and have, this month, started to converge again. As the arrows there should be much more of this to come. Either Crude falls or the Dollar strengthens.

 

From the blog

Four Poisons of the Mind

Deep Survival: Who Lives, Who Dies, and Why by Laurence Gonzales (published 2004, W. W. Norton & Company) has many lessons for traders and here is one of them:

There is a Korean martial art called Kum Do. This is a brutal game that involves a fight to the death with very sharp swords. The way it is practiced today is with bamboo sticks, but the moves are the same. Kum Do teaches the student warriors to avoid what are called “The Four Poisons of the Mind.” These are: fear, confusion, hesitation and surprise.

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