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; black gold continues to rapidly rise in price, thereby causing panic and movement in the financial markets.

Many people wonder if there is a relationship between the US dollar exchange rate and the price of oil?

Yes, there is, in most cases, a close relationship can be found between these two trading instruments, because the United States is one of the largest oil producers, so changes in oil prices cannot but affect the national currency of the United States.

It would seem that a decrease in oil prices should entail a decrease in the dollar exchange rate, but everything is just the opposite.

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

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 American dollar, which has significantly improved its position against the euro since May 2014, but then the quote 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 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 to the price of oil?

Most likely, the United States will not help reduce the price below $60 per barrel, there are two reasons for this:

• 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 short indefinitely and traders should be prepared for a possible increase in the price of oil or at least stabilization of the existing price.