Crude Oil Decline Could Force Further US Dollar Rallies

[DailyFx]

Crude oil continues to trade lower on reduced fears that OPEC will cut production and that Hurricane Ike will cause damage to US oil infrastructure in the Gulf of Mexico. The US dollar has responded in kind, trading higher in near-lockstep with the NYMEX-traded West Texas Intermediate (WTI) futures contract, as the correlation between Oil prices and the Euro/US dollar is at its highest since the inception of the euro.


Crude Oil Chart Shows Risk of OPEC-led Breakdown




If tonight’s OPEC meeting indeed confirms that the oil-producing cartel will keep production levels at current highs, we could see the WTI contract break below nearby Fibonacci support at the 50 percent retracement of the 57.44-148.19 move at 102.82. Such a break would next eye previous support levels at 95.00 and the 61.8 percent retracement of the aforementioned move at 92.11.