The U.S. Dollar Index remains the driving force behind every market move. When the dollar rallies the markets deflate, the opposite is true when the dollar declines the major stock indexes inflate and trade higher. This is what occurs in deflationary environments. Last week we mentioned that the dollar looked strong on the weekly chart. We can see the evidence of that strength this past week as the U.S. Dollar advances toward the weekly $90.00 resistance level. As of this time the trend is very strong in the dollar. The only negative that can be seen for the dollar is that it is getting extended and a little overbought in the short term, however, in strong trends it can remain that way for extended periods of time.
Traders and investors that want to trade the U.S. Dollar index to the long side can use the PowerShares DB US Dollar Index Bullish (NYSE:UUP). For the traders and investors that would like to trade the dollar to the downside or short the currency can use the PowerShares DB US Dollar Index Bearish (NYSE:UDN).
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