On Monday<\/a>, readers were walked through the importance of the dollar and the power the Fed has over every other central bank in the world.<\/p>\n Today, we’re going to look at an updated chart of the dollar index (DXY) to see if there are any technical clues as to the future of the greenback.<\/p>\n You can see that chart below.<\/p>\n First, let’s look at the Bollinger bands.<\/p>\n Bollinger bands are a great measure of market volatility. When prices break through the upper or lower bands, it’s a sign that the market is moving strongly either higher or lower.<\/p>\n While a market can trade for a significant amount of time, it’s worth noting that the majority of the time, a market will trade between<\/em> the upper and lower bands.<\/p>\n This means that breaks beyond the upper or lower bands are important events that traders should be looking for. In fact, one of the first trading strategies I used early on in my career relied entirely on reversal trades found along those outer Bollinger bands.<\/p>\n We can see that DXY has strongly pierced the lower Bollinger band before trading back inside of it. However, simply tagging one of the outer bands isn’t a good enough reason on its own to get into a trade.<\/p>\n <\/p>\n 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 That’s why we also have the Relative Strength Index (RSI) at the bottom of the chart.<\/p>\n The RSI is my favorite momentum indicator. It does a great job of helping identify turning points in the market when combined with another indicator like the Bollinger Bands.<\/p>\n We can see how the RSI registered an extreme oversold reading at the same time prices broke below the lower Bollinger band.<\/p>\n These two signals both suggest that the dollar is likely to continue trading higher for at least a little bit longer. However, my analysis suggests that this upside will end up being a bear market rally.<\/p>\n That means that after the dollar gets a bit of relief, it’s likely to sell off once more against its peers.<\/p>\n Aggressive traders could look to play both the long and short side. Trend-following traders, on the other hand, will wait out the rally and look for an opportunity to ride the dollar lower.<\/p>\n As a currency trader, I’ll be watching the moves the dollar is making very closely. Once I see something interesting, you’ll receive an update right here in Market Minute<\/em>.<\/p>\n Happy trading,<\/p>\n Imre Gams<\/p>\n <\/p>\n![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202307\/20230726-JMU-01_nri141.png\")
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