Oil intermarket: DXY to remain a positive correlation for a while?

Oil has rallied over 9% today on the back of OPEC striking a deal to cut production, finally, and what came as a surprise, despite the long awaited meeting. The dollar has also rallied, usually negatively correlated to the black gold, but there are themes under the surface here that may mean the DXY and oil could stay positively correlated intraday.

Despite the stronger dollar that usually makes it more expensive for holders of other currencies to buy oil, with this sudden turnaround to bullish oil, higher oil prices are going to increase inflation and subsequently that is going to be driving interest rates up as well, adding to the bearish bond market and potentially accelerating the Fed into action.

On the back of this sentiment, U.S. Treasury yields saw their largest jump in two weeks to 2.36%, the highest level in 16 months and at the same time, the Yen dumped on the yield differentials and investors piling into higher yielding treasuries today. The 200 dma at $44.94 has been left for dust on the back of this deal, and a break of $49.00 targets $50.90 Sep 2015 highs. The US Dollar index, which gauges the US dollar against its main competitors, ended the day with a gain of 0.60% on the day to 101.83 highs on the back of positive data as well.

Dollar index rises after OPEC deal, approaches 2016 highs