Dollar Down, Oil Up

Feb 29, 2008: 11:23 AM CST

Did anyone else find it concerning that President Bush, in a news conference yesterday, was astonished by a reporter’s question asking what would be the effects of gasoline prices at the pump reaching $4.00 per gallon by the summer?

It would seem like his team of economic advisors would have alerted him to this possibility, at least so he could have a credible response.

Anyway, enough of that. Let’s look at the recent charts of the US Dollar and Crude Oil prices:

And let’s peek at the weekly chart to see what implications that might show:

If price completes a “measured move,” which would be from the most recent price swing from $70 to $100, then the potential price target from this possible flatline flag break would also be $30, which would take price to $120 or $130 per barrel.

The Federal Reserve tells us that the economic slowdown that we are experiencing will help curb demand on gasoline/oil and thus keep the price in check, and that very well may be the case, but it’s not happening yet. The technical pattern of crude oil certainly puts the odds for higher oil prices as greater than lower prices at the moment. We will continue to monitor this situation with great interest, and what it may mean for the overall market.

And finally, the US Dollar Index made a new low while crude oil made a new high:

The US Dollar Index made all time lows at $73.62, and made new lows against the Euro. It now takes $1.51 Dollars to purchase one Euro. This is not good for US tourists abroad, but is actually somewhat good for large, multinational companies based in the United States.

Both trends are still strongly in force, and will continue to be so until price forms a clear reversal. Visit or join Market Club for daily updates, analysis, and insights.


2 Responses to “Dollar Down, Oil Up”

  1. Tom Says:

    Obviously no triple top. The problem is oil is scarce but the bigger problem right now is the Dollar and for quite a while to come I am afraid.

    The Fed is trying to fix problems (the sub prime, real estate mess) brought on by too much credit or easy money with low rates by reducing rates and providing lower cost money. That could be like trying to put out a fire out with gasoline.

    The history of the Federal Reserve is pretty much a disaster. The lone exception was in my lifetime the tenure of Paul Volker. Volker said he was going to break the back of inflation with he did. It was painful but necessary. At the time I was 29 with a pregnant wife and had to borrow at 11+% on a mortgage to buy a new house for my wife and me and our soon to be born son. The prime rate shot up to 21%. But I was loaned the money on the house because I could pay it back. Rates eventually fell and we enjoyed relative prosperity for probably 20 + years as a result of Volker’s tough policies. He did not have much help from Congress but compared to today the politicians then were misers.

    I think we are headed for real Weimar Republic inflationary trouble in the years ahead because of our present governmental fiscal policies and Chariman and Reserve members like Mr. Bubblicious, Alan Greenspan and apparently the present Chairman. Hopefully I can stick around long enough to see the course change again.

  2. Corey Rosenbloom Says:

    True, and these trends are likely to continue until some major intervening force takes over, and that force may be beyond the government’s power to control it.

    I cannot imagine a prime rate of 21%. It must have been absolutely prohibitive for so many individuals and businesses, but as you said, it ‘broke the back’ of inflation.

    I remember stories in the Weimar Republic where people had to carry money in wheelbarrows to the grocery store, and how people literally burned money in the fireplaces to stay warm or cook food because each bill was worth less than pennies, and it kept getting worse.

    I don’t believe that can happen in the American Republic, but thinking about that possibility is beyond chilling.

    Thank you for your comment.