Oil intermarket: Fed related sell-off pressures S&P, demand and DXY in charge

Oil has been punished on a stronger dollar of late, with the Fed's funds rate has picked up and markets pricing in a 20% chance of a Fed hike in September.

Oil has dropped from $47.48 to $44.52 along with the stock market in direct correlation, in the S&P 500 CFD tanking to 2162 while the DXY maintains its position on the leader-board better bid around the 96 handle. 

Our weekly technical view warned of risk toward $44.50," explained analysts ta Brown Brothers Harriman.  "This level was tested today, and prices remain heavy.  Today's 3.75% drop means that the October contract has now retraced 50% of this month's rally (~$44.65).  The 200-day moving average is a little lower at $44.35."

Oil and inflation expectations come with unusual US yield correlation

"The pullback in oil prices is not having the usual impact on inflation expectations reflected by the 10-year breakeven (the difference between the conventional yield and the Treasury Inflation Protected Securities--TIPS)," explained the analysts, adding, "That breakeven has been mostly confined to a 5 bp range (1.45%-1.50%) with a few exceptions since early July.  It is a little (less than half a basis point) higher today despite the drop in the price of oil today.    One day a trend does not make, but the rolling 60-day correlation (on the percent change) has eased from 0.70 in late-July to less than 0.60 now."  

However, all this can quite easily be turned around should the Fed disappoint this year and not hike interest rates, leading to a rally in risk that should create a demand for the black stuff while stocks can continue to rally within the easy money bubble. Is there nothing more than the Fed? Please, let's get real