The dollar exchange rate and the price of oil, the relationship.

Recently, the price of oil has become the number one topic on all news channels, with the black gold continuing to soar, causing panic and volatility in financial markets.

Many are wondering if there's a correlation between the US dollar and the price of oil.

Yes, there is. In most cases, a close correlation can be found between these two trading instruments. The US is one of the largest oil producers, so changes in oil prices inevitably affect the US dollar.

It would seem that a decline in oil prices should lead to a decline in the dollar, but the opposite is true.

In addition to the fact that the United States produces about 12% of oil, this country is one of its largest consumers, having to purchase millions of barrels daily from other countries for domestic needs.

That is, cheap oil has a positive effect on the US economy, thereby causing an increase in the value of the national currency.

This is confirmed by the history of the strengthening of the US dollar, which has significantly improved its position against the euro since May 2014, and at that time the quotation of the euro / dollar currency pair was actually at the level of 1.4000. Now the price has dropped to 1.2400 dollars per euro.

It was in May of this year that the price of oil began to fall, as we can see, this fact had a favorable effect on the exchange rate of the American currency, contributing to its strengthening.

Everyone is interested in the question - What will happen next with the price of oil?

Most likely, the United States will not contribute to a decrease in prices below $ 60 per barrel, for two reasons:

• Unprofitability of oil producing companies within the country.
• Excessive strengthening of the dollar reduces the competitiveness of American goods in foreign markets.

So, it will not be possible to play for a fall indefinitely, and traders should be prepared for a possible increase in the price of oil or at least a stabilization of the current price.