Oil intermarket: black gold suffers in risk-off Brexit conditions

It has been a volatile end to the week and the greenback has picked up a bid on a flight to safety as the world's reserve currency; while at the same time, oil has continued in its bearish correction.

The DXY has rallied from 93.53 to 94.87, falling back to 94.26 and drifting high again to 94.50 over the last 24hrs. Oil, on the other hand, has slid right back from the recovery highs on the $51 handle and printed a fresh new low of $46.23, despite the Fed holding fire for this summer and becoming more dovish at every turn. The S&P 500 has also mirrored the direction of oil in a supply driven market with 30 year yields at 2016 lows of 2.4.

The recent downside and shift in the dollar has forced oil below the supportive 20 dma at 48.89 and the price is now pressuring the 50 dma at 46.17 and 1st May resistance that could prove a strong area of demand. However, as volatility and risk-off markets move into thinner trade the closer we get to the EU referendum, we may see a continuation in that flight to the big dollar, causing oil to depreciate further between now and the 23rd June. Should Britain vote to remain in the EU, a serious bounce in the pound and risk should evolve and that would support a demand driven sentiment to carry oil higher, with longer term US yields moving in the same direction while the dollar could be driven lower on hefty profit taking.