US Dollar Index and crude oil
In the last week, March WTI crude futures rose by 8% from its bottom in the previous week because of a weaker dollar. However, as of February 5, 2016, WTI futures managed to close about 3% above the weekly lows. The Spot Dollar Index fell by 2.5% from its weekly highs. It managed to close about 2% below its weekly highs. On a YTD (year-to-date) basis, the US Dollar Index fell by 1.6%. Last year, the US Dollar Index rallied by about 9.3% on a YTD basis.
The US Dollar Index is negatively correlated with the commodity price. Since a commodity is dollar denominated, an appreciation in the dollar directly implies a subsequent fall in crude oil’s price. Experts think that the Fed might not raise interest rates this year. Since the interest rate is positively correlated with the currency’s strength, a dovish stance by the Fed will be positive for the commodity.
In the next part, we’ll discuss the moving averages and analysts’ estimates for US-based (SPY) upstream companies such as Anadarko Petroleum (APC), ConocoPhillips (COP), Pioneer Natural Resources (PXD), EQT (EQT), and others.