Get Ready for the Dollar Rally?

For the past year, a strong dollar meant a weak overall market. That trade has decoupled in today's session, as all of the major indices are significantly positive on the day despite the dollar's strength against other major world currencies. The PowerShares DB US Dollar Index Bullish

ETF is currently trading up 0.4% from yesterday's close to $21.21 – near the highs of the day. As the six month daily chart below shows, the Powershares DB US Dollar Index Bullish appears to have put in a double bottom after finding support at the $21.00 level. The failure to break below the 52-week low of $20.84, which was set on May 4th, bodes well for investors in the U.S. Dollar - at least in the near term. If shares can break over the 50-day simple moving average, a test of the $21.75 level appears to be imminent. Beyond that, no real resistance comes into play until the $22.60 level. In another bullish technical development, the RSI indicator (14) also appears to have put in a double bottom (six month daily chart), as the 25 level held strong. There has been a significant amount of volatility in the currencies markets over the past year, but the charts are pointing towards a sharp rally In the U.S. dollar – at least in the near term. Time will tell.

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