Oil trading lower, but will a falling dollar cushion oil prices

Oil is trading lower in Friday’s afternoon session as worse than expected US GDP data pushes markets lower, but will the falling US dollar help cushion oil prices from steep losses?

US GDP, or the value of all goods and services produced in the United States, has risen only 2.4% in the second quarter of 2010 and lower than expected.

A Further Look at What’s Going on with the Dollar

Below is an ICE Dollar Index chart from 2005 to present day, notice that recently the Index has taken a big hit lower from the 87 mark to the 81 mark, this is significant.

Meanwhile, the ICE Dollar Index is continuing to show a pattern which looks straight down from here, with the current rate at 81.78, although today the Index climbed a touch. Over the longer term the dollar could drop much further, helping to lift commodities including oil and gold prices higher.

A weaker US dollar makes oil cheaper to trade and buy for investors using other currencies as, of course oil is priced in US dollars.