The dollar is at 52-week highs against a basket of major currencies after bad economic news in Europe and revised U.S. data helped bring investors into the greenback. The U.S. Dollar Index currently trades at 82.465.
German unemployment hasn't gone down, and European consumer confidence is weakening. Meanwhile in the United States, second-quarter GDP was revised higher to 4.2 percent from previous estimates of just under 4 percent.
Over in the bond markets, European yields are shockingly low as EU countries struggle with a stagnate economy. Germany's 2-year bunds trade below 0 percent – you pay the German government just to own their debt – while the Spanish government's 10-year bonds yield lower than their American equivalent. That matters to the currency markets because the lower the yields, the weaker the currency.
But Gina Sanchez, founder of Chantico Global, thinks the dollar may move up more but not a lot more.
"It can continue to move higher, but I do think that it's somewhat limited at this point," said Sanchez of the U.S. currency. "The markets are expecting rate hikes in the U.S. at least in the next six to nine months. And if you look around the world – Europe and Japan – we're expecting probably continued weakness and even potentially some monetary policy action in Europe that could weaken the euro. Those both lead to a strengthening dollar."
However, America's employment situation –and what it can do to U.S. interest rates – could rein in the reign of the dollar. "If we see slack in labor markets and continued weakness in labor markets, I think that the move toward higher rates might be slower," said Sanchez, a CNBC contributor. "That might temper some of this dollar enthusiasm."
Like Sanchez, Todd Gordon, founder of TradingAnalysis.com, may be bullish on the dollar but he also sees a limit on the dollar's upward move based on the charts of the U.S. Dollar Index.
"We are probably going to be the first to raise rates in developed nations," said Gordon, a CNBC contributor. "That's going to lead a bit into the dollar."
Yet Gordon warns against chasing the Dollar Index at the moment. That's because he sees it hitting up against a multiyear downtrend line begun in 2011. "Wait for a little bit of a pullback to then establish longs," he suggests.
Instead, he thinks traders should wait for a pullback by about 1.50 points – similar to a pullback earlier in the summer – before getting into the U.S. Dollar Index.
"That's going to coincide pretty well with the ECB meeting," Gordon said. "We're expecting a little bit of dollar weakness/euro strength which I think will pull that U.S. dollar into the buy zone."
To see the full discussion on the U.S. Dollar Index, with Sanchez on the fundamentals and Gordon on the technicals, watch the above video.