Although the dollar is surging thanks to the new tone on the U.S. economy, the technical picture indicates that the gains may be topping out soon.
DXY is a crowded trade right now, rising on general sentiment but it looks like there are only a few more days — at most — here before the recent thrust takes the dollar index up into some pretty heavy overhead resistance.
It does look like DXY will ultimately respect the 20-day moving average, which is currently trending at around 80. If anything, right now the DXY’s current level of 80.40 looks a little overbought beyond the short term.
But in that short term, a reasonable top to look for would be 80.75. It is fairly unlikely that we will see it hop up beyond 81.70 — where the hard 200-day resistance is — in any event.
We might get real job creation tomorrow to keep the sentiment running high, but unless the big boys truly are unwinding USD/CHF or USD/JPY trades, the dollar may not get much stronger from here. This, in turn, would make it safe to take another look at your commodity and emerging currency trades.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.