The U.S. dollar's rally is having an unusual effect on the commodities market. Gold prices have fallen as expected, while crude oil has rallied to its highest level in years.
Oppenheimer's Ari Wald says this setup is bullish for the broader market.
"When the value of the dollar rises, it typically costs less to buy commodities that are priced in the dollar. So it's no surprise that we've seen [the] U.S. dollar reverse its year-long downtrend — it has strengthened — and against that backdrop the price of gold has broken down," Oppenheimer's head of technical analysis said Monday on CNBC's "Trading Nation."
The DXY U.S. dollar index, which measures the greenback against a basket of foreign currencies, is up 1.5 percent this year and gold is down 1.4 percent. Since the beginning of April, the dollar index has gained nearly 4 percent while gold has dropped almost 3 percent. Wald says that is the "typical relationship" between the dollar and gold.
"What's interesting to us is that the price of oil has held firm against this strengthening greenback, so our take is that this is a sign of bullish risk appetite — that economically sensitive commodities like oil are outperforming more safe-haven ones like the price of gold," he said.
As the U.S. dollar increased more than 1 percent since the beginning of the year, the price of crude oil surged 20 percent.
Dennis Davitt, partner at Harvest Volatility Management, says the rise in oil should give opportunity to stock market bulls.
"Equities are a buy here because they're good hedges against inflation, so the inflationary aspects of oil outside of the dollar are what you should really look towards," Davitt said on Monday's "Trading Nation." "There is strong growth coming out of the United States, and that's where we're seeing the price of oil go higher."
West Texas Intermediate crude rose on Tuesday to its highest level since November 2014.