Back in April when I first posted the possibility for
oil to go to $75 a barrel , I stated I have no idea what will trigger it to that level. In April, I was purely interpreting the cup & handle chart formation and projected the measured move to the $75 level. But now, we all know the catalyst for the oil to move above and beyond this measured move of $75 a barrel. No, it’s not due to increase in demand for oil and it’s not the ‘green shoot’ crap those talking heads were preaching how the economy is recovering. It’s the printing of the US dollar that caused the price for commodities such as oil (and gold) to rise. As the dollar weakens, oil prices and other commodities prices started to rise. Now that oil has reached above $80 a barrel while the US economy is still in a recession, the manipulators will come out and push the price back to the $60 level where OPEC can live with and won’t cause dramatic price pressure for the US consumers. The present state of the US economy cannot withstand $80 or even $70 a barrel of oil for a sustained period without killing off the already weak US consumer spending.
Here is an intraday hourly chart of the ETF for the US dollar, UUP.
Prices have been creeping up and broke above the downward trendline. A divergence on the MACD is signaling a possible trend change. I believe the Fed will start hinting a possible rate hike in the near future to talk up the US dollar. The fear of this potential rate hike that could delay the US economy from recovering will put a temporary halt to the stock market rally, and the commodities trades based on weak US dollar will start to unwind and that will take the oil back below $60 and gold under $1000 an ounce. Take a look at the following charts for some of the key levels in the near term for oil, gold ETF:
