When looking at the dollar index from a technical POV, we see the dollar has been in a multi-year range bound market.
Currently, price is at the top of this range, after having a relatively strong run up to this point given the current economic climate. Naturally, it would be ideal to look for shorts at this area, due to it being a strong resistance zone.
Usually when the dollar goes up, equity declines in value - there is an inverse relationship...realizing that the stock market is currently at levels where some are calling for a bear market, and the dollar at levels of multi-year resistance, one could assume the dollar will once again decline, giving equities a much needed bounce.
However, it is best to react rather than predict. Ill be waiting for: 1. The 4h 7-EMA to be broken and retested. This would signify a change of trend on the intraday level.
2. From there, Id look for bearish reversal candles on the daily timeframe at the top of the range. Inclusive of pinbars and engulfing candles.
3. Fundamental catalysts like news. This wouldnt necessarily make or break the trade, but good news for the equity market with hawkish news for the dollar would be a plus for the short trade.
4. If the dollar continues to gain strength, then I will do nothing.