The U.S. dollar has enjoyed a massive rally over the past two weeks, which has weakened commodities such as gold and crude oil. But according to several traders, the worst could be yet to come.
A strong dollar tends to hurt commodity prices, because as the dollar gains in value, then it takes fewer of those dollars to buy an ounce of gold or a barrel of oil. Consequently, a rising Dollar Index (which compares the U.S. dollar to a basket of four other currencies) usually causes gold and oil prices to drop.
The bad news is that with all eyes on the Federal Reserve, many expect the dollar to rise further once the Fed cuts back on its quantitative easing program. And with news of stronger-than-expected jobs growth coming on Friday, Fed Chairman Ben Bernanke's speech on Wednesday could lead investors to expect that a reduction in QE could come soon.
(Read more: Fed official cautious on taper despite jobs bounce)
"Bernanke speaks in a town hall meeting Wednesday night, and then we also get some money supply numbers on Thursday, and I'm watching this because if you look at the strength of the dollar, that could lead to a selloff in gold," said Brian Stutland of the Stutland Volatility Group.
He advocates putting on a pairs trade to take advantage of the potential move.
"One thing I'm looking to put on here is to short gold and buy the 10-year note as a pairs trade," Stutland said. "I think that plays out really well as long as the U.S. dollar stays strong."
(Read more: Whoops! Bonds get jobs wrong at the last minute)
Anthony Grisanti of GRZ Energy says that dollar strength only adds insult to injury for oil, which has been hurt by a bearish supply-and-demand picture.
"This week, I'm looking to short oil again," he said. "With the demand picture the way it is, and the supply picture very great—and now you have a strong U.S. dollar—I think there's going to be a lot of pressure on oil this week."
—By CNBC's Alex Rosenberg. Follow him on Twitter: @CNBCAlex.
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