Oil Vs. Dollar

                Just a little insight into the relationship of oil prices vs. the U.S. dollar.  As you can see by the chart below, the U.S. dollar and oil have an inverse relationship.  This explains the current drop in oil prices as we have had an increase in the value of the dollar.  We have heard a lot of different theories from the talking heads on TV about what has caused this move.  However, as you can see, it is technically just the inverse relationship.

So where does it go from here?  I believe that over the short term we will see an even larger spike in the U.S. dollar.  Right now we are seeing what is called a wedging pattern which is usually a sign of accumulation.  The ADX lines are moving towards a bearish alignment in the short term but are forming a longer term divergence.  The MACD has moved into positive territory and is also forming a divergence.  And the stochastic is forming a divergence with a short term roll over.  All this indicates that short term, we are going to see a downward move in the dollar.  Long term, it could go either way but our indicators say it will go up.  In short, I think the dollar will continue to rise and oil will fall.  Unfortunately this will force the FED’s hand and bring about QE3.