Dollar Index Up 5% Since June: Is It Time To Trade The Forex Market?

The Dollar Index is trading at levels in a bull market last seen in February 2000. 

The 5% move to the upside since last month is significant, as the price is now trading outside of a range dating back to March 2015. 

As the expression goes, the longer the consolidation, the bigger the breakout, and if the price holds outside of this range, we could see it push further up to the high of July 2001 at 120.

A move of 14% is required to achieve that. 

Below I have the monthly timeframe. 

I have highlighted the consolidation and the room the price has to move before it encounters resistance at the 2001 high. However, given the age of this resistance level and that price tends to break through support/resistance levels when in a trend, there is a high likelihood the bulls could make light work of this level and push further towards 130.

Also read: Benzinga Survey: How Many People Predict A US Economic Recession?

What is my stance and when will I enter?

First of all, I don't trade the Dollar Index. I use it as an indicator similar to the S&P 500 for the stock market and Bitcoin for the crypto market. 

If the Dollar Index confirms further strength, I will then narrow down to the dollar pairs with the highest chance of trending and returning a profit. 

The major pairs I monitor are:

• The AUDUSD
• The EURUSD
• The GBPUSD
• The NZDUSD
• The USDCAD
• The USDCHF
• The USDJPY

The exotics I keep a close eye on that also have a history of performance are:

• The USDDKK
• The USDSEK
• The USDSGD
• The USDTRY

I won't add all of them, just the two to four with the best setups. As they perform and hand out profit, I will compound. 

For now, I will continue to stand aside and wait for the Dollar Index to confirm further bullishness before taking positions. This way, I reduce the chances of getting in on a fake breakout and further protect my capital. 

Remember, a good investor focuses on capital protection first and lets the profit come to them, and it will in abundance. It is just a matter of timing.