The dollar made a BIG move higher last week. And there’s still more upside ahead.

Here’s an updated look at the PowerShares DB US Dollar Index Bullish Fund (UUP), we’ve been watching for the past couple of weeks…

UUP has busted out higher and is approaching the first upside target just below $24.20 per share.

Key technical indicators, like the MACD momentum indicator and the Relative Strength Index (RSI), have stretched into overbought territory. But they’re not showing any signs of negative divergence. In other words, as UUP has powered higher, the MACD and RSI indicators have powered higher, too.

This sort of action indicates the momentum behind the uptrend is strong. Any pullbacks will likely be short-term only. And, after a quick decline to relieve the overbought conditions, UUP should rally to an even higher level.

So, here’s how I think this plays out for the dollar…

If Friday’s intraday rally in the buck did not mark a short-term high, then we’ll probably see that high sometime today or tomorrow. Then we’ll get a quick pullback in the dollar to relieve the short-term overbought conditions.

If you’re trading UUP, then look for it to pull back towards its 9-day exponential moving average (EMA) – which is currently at $23.84 and rising. That sort of decline should be enough to get the MACD and RSI indicators to pull back towards neutral levels. Then, UUP will be set up to rally again.

On the next rally, though, look for UUP to break out above the $24.20 resistance level and maybe make a run towards the December high near $24.50.

Keep an eye on the MACD and RSI indicators during that rally. If they fail to get above the current high readings, then we’ll have negative divergence in place. And that negative divergence will be a good sign that the current rally in the dollar is ready to end.

For now, though, the trend is strong. The buck is overbought, but there’s no sign of negative divergence. The dollar might pull back just a bit over the next few days. But, by the look of the chart, it still has higher to go.

Best regards and good trading,

Jeff Clark

Reader Mailbag

What’s your trading plan for a bullish dollar over the next few weeks? How have you had success already?

Let us know right here…