Oil Gaps on Dollar Craps
June 6th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
See what I mean about that dollar and oil?
I expected to see a bit more downside on oil, but, as I said, you need that dollar crank to play along. It did, for a while, as noted. If you covered in time, nice one. If you didn’t cover your winner, two axioms that must be front and center on countertrend cranks are: 1) Pigs get slaughtered and 2) Nobody ever went broke taking profit.
Gold, oil and the U.S. Dollar Index are all rangebound slop now. Know that your indicators contain more noise here.
I’m still unflinchingly short the dollar and have remained so throughout these BS crank rallies. I didn’t cover my UDN. I didn’t sell any gold. I don’t trade oil.
Via: Wall Street Journal:
Oil rose above $130 a barrel Friday in Asia, extending gains made in the previous session when the euro rose against the dollar in response to comments by the head of the European Central Bank.
Including gains in the previous floor session, that put oil more than $8 higher than at the middle of the week.
The dramatic reversal in what had been a weakening market came after ECB President Jean-Claude Trichet suggested the bank could raise interest rates and the euro climbed against the dollar. When interest rates rise in Europe, or fall in the U.S., the dollar tends to weaken against the euro. Many investors tend to buy commodities such as oil as a hedge against inflation when the dollar is falling.
Also, a weaker dollar makes oil less expensive to investors dealing in other currencies, and analysts believe the dollar’s protracted decline has been a major reason why oil prices have nearly doubled in the past year.
Meanwhile, the dollar held relatively steady against the yen, changing hands above ¥106 yen in Tokyo’s currency market. The euro was trading at levels near $1.56 after dropping back some from the day before.
Mr. Trichet spoke Thursday after the bank left a key interest rate unchanged amid concerns about inflation. While Mr. Trichet said a change in rates wasn’t a certainty, he said some of the bank’s governors favor an increase.
Light, sweet crude for July delivery rose $5.49 overnight — its biggest single-day price increase in the history of the New York Mercantile Exchange crude contract — to settle at $127.79 a barrel. Larger one-day percentage jumps have taken place in the past.
Late afternoon in Singapore, the contract was up $2.64 at $130.43 a barrel in electronic trading.
Earlier this week, Federal Reserve Chairman Ben Bernanke indicated that more interest rate cuts are unlikely in the U.S., sending the dollar higher and pushing oil prices lower.
Oil’s decline from the record $135.09 hit May 22, though, has come largely on concerns about demand, and the factors that slashed the prices by more than $10 are still present, analysts noted. They said they were uncertain whether Thursday’s trading could be the start of a new surge higher or just an exception. Recent data show high prices have led consumers to cut their gasoline consumption.
When oil closes up more than $10. and the Dow plunge team lets out some steam with a 3 per cent decline, the only outlet for that kind of pressure is hostility. Head out to the garden and make ready for the harvest.