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Dollar rally presents 'rare' short opportunity: Trader

Suddenly, the greenback is looking a lot greener.

The U.S. dollar index soared more than 1 percent on Thursday, hitting its highest level since Oct. 2. The move was fueled by the decision from ECB President Mario Draghi to leave interest rates unchanged and hinted at further easing. But some experts warn that traders should use the rally as a rare opportunity to get short the currency ahead of next week's FOMC meeting.

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"I would be very careful buying the U.S. dollar at this stage," Kathy Lien told CNBC's "Futures Now" on Thursday. According to Lien, recent government data shows a lot more weakness than strength in the U.S. economy, which means the Fed's "hands are tied" in terms of raising interest rates in the near term. "The FOMC is the perfect catalyst for [a move lower] in the dollar."

Lien expects the statement Fed Chair Janet Yellen releases next week to be "relatively benign," which could put pressure on the dollar into and out of the meeting. Many market participants have already written off the possibility of a rate hike this year, with the focus now shifting to March 2016.

"I think the dollar could sell off going into the decision based on the expectation of no action," added the managing director at BK Asset Management. While Lien is a long-term dollar bull, she does expect the selling pressure to last well into November.

Technically, trader Scott Nations said the dollar is running up against resistance at its key moving averages and is currently breaking out of a "wedge" formation. "We saw the dollar work its way into this narrow wedge," Nations said on Thursday. He noted that there was a similar pattern in crude oil two weeks ago, which resulted in a sharp and subsequently failed rally.

"This wedge presents a rare trading opportunity as any breakout will be extremely volatile," added the founder of NationsShares. "I think it's a good time to get short." Nations pointed to the dollar's October low of around $94 as a key level to watch.

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