![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202304\/20230501-JMU-01_kdu775.png\")
<\/p>\nBetween February 2 and March 8, the U.S. Dollar Index (DXY) rallied just over 5%.<\/p>\n
Since then, DXY has given back all of those gains.<\/p>\n
This has left currency traders wondering when the dollar is going to make its next big move and in which direction that move will be.<\/p>\n
The “when” part of the equation seems quite straightforward. The Fed’s next meeting is on May 3, when they will announce their next interest rate decision.<\/p>\n
Whatever the outcome, it’s almost guaranteed there will be significant volatility in the markets.<\/p>\n
Which direction the dollar will take is a lot more complicated…<\/p>\n
That’s why I’ve prepared a fresh chart of the U.S. Dollar Index below so I can walk you through both a bullish and bearish case.<\/p>\n
Check out the chart below…<\/p>\n
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The key feature of this chart is the large head and shoulders pattern that’s been taking shape since July 2022.<\/p>\n
This chart pattern is a classic bearish setup made up of three components – the left shoulder, head, and right shoulder.<\/p>\n
Once all three pieces of the pattern are in place, you can draw the neckline which connects the bases of both shoulders.<\/p>\n
The pattern is complete once prices break below the neckline.<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n There’s only one issue with this particular head and shoulders setup… it’s too obvious!<\/p>\n I scanned my Twitter feed to see if any other traders have spotted the same pattern, and indeed they have. This pattern has garnered thousands of views on Twitter alone.<\/p>\n As Jeff Clark likes to say, the market rarely rewards the popular trade.<\/p>\n That doesn’t mean that the dollar isn’t due for a lot more downside, it just means that I recommend being cautious with this particular setup.<\/p>\n I’d like to see at least three days where DXY is trading below the neckline. If we get that occurrence, then I’ll be a lot more inclined to trust the pattern.<\/p>\n But on the other hand, it’s also very possible that dollar bulls will step in to defend the currency, negating the bearish potential of this pattern.<\/p>\n Either way, the dollar seems poised for a big move. Until the direction of that move becomes clearer, it’s advisable for currency traders to stay on the sidelines.<\/p>\n I’ll be sure to update you on the dollar’s movements very soon.<\/p>\n Happy trading,<\/p>\n Imre Gams<\/p>\n <\/p>\n