This chart points to a dollar rally ahead: Technician

A dollar resurgence is on the horizon, says one technician who sees bullish signals in the charts for the U.S. currency.

Rich Ross of Evercore ISI is looking at three key indicators on a weekly chart of the dollar index that have led him to make his bull case for the greenback.

"We saw a surge in the dollar index as that Trump reflationary narrative really takes off," he said Wednesday on CNBC's "Trading Nation." "Of course, it pulls back [near the end of 2016 ] when that narrative is called into question. But I think we have a really bullish setup."

While the dollar index did pull back from its post-election highs over the past few months, Ross sees a "bullish falling wedge" that started developing just before the start of 2017. The wedge Ross observes shows the index making higher lows just below 99.

Second, Ross says that the wedge is also going toward the 50-week moving average, a trendline that has been gradually moving up this year for the dollar index, which compares the dollar to a basket of major currencies made up primarily of the euro. The technician considers the 50-week moving average "support" for the dollar, meaning he sees the currency bouncing up once the wedge meets the line.

Finally, Ross points out that there looks to be a "bullish engulf" on the dollar chart's candlesticks as the currency nears the 50-week moving average support. The term refers to a technical pattern where one candlestick eclipses the previous day's in size, essentially engulfing the smaller candlestick and establishing higher levels that day.

The dollar index has dropped more than 2 percent year to date, but Wednesday's bounce took the currency close to three-week highs.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more