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This 'ugly' chart is about to get even uglier: Trader

Trading the dollar decline
Trading the dollar decline

The dollar index is on a two-week losing streak, and some strategists expect further downside.

The index, which measures the value of the U.S. dollar relative to a basket of foreign currencies, including the euro, fell Friday to its lowest level since June 2016. The slide came as the euro surged against the greenback and a string of negative news flowed out of Washington early in the session.

When asked if he would buy the U.S. dollar at this juncture, given its beaten-down condition, Crossing Wall Street blog editor Eddy Elfenbein said, "I'm not, and I've got to say, it is an ugly chart, and I think it's going to get even uglier."

"The dollar seems to go down a little bit just about every single day," he said Friday on CNBC's "Trading Nation." He said last week's weakness was due in part to the euro's strength following remarks from European Central Bank President Mario Draghi.

Draghi did not mention "the strength of the euro as being a problem, sort of like the dog that did not bark, and when central bankers give a green light, traders are in the habit of following along. I think it is going to continue to get worse for the dollar and then, of course, we have a Fed meeting coming our way next week," Elfenbein said.

Higher interest rates typically tend to increase the value of that country's currency relative to that of foreign currencies. But that's not always the case, said Chris Verrone, head of technical analysis for Strategas Research Partners.

"In five of the last six times the Fed has raised rates, you've seen the dollar go lower, not higher," Verrone said Friday on "Trading Nation." "So this price action really hasn't been that abnormal from what history tells us should happen. I think the question here is, tactically, do we set up for a bounce? Look to 92.5, 93 for support in the near term."

On Monday, the dollar index was trading at 93.91, and has declined more than 8 percent this year.

Verrone believes the dollar's sell-off is close to being overdone, and would neither buy nor sell it right now.

"I would be hesitant in saying 'go out and buy it,' just yet," he said. "I think, best case, you get tactical bounce. It's too hard to time, too hard to play for."

In a note to clients Friday, Brown Brothers Harriman global currency strategists wrote that the dollar is "very much unloved."

"The apparent stabilization of the political situation in Europe, and sustained pace of above trend growth contrasts with the US, where the political situation leaves much to be desired and the economy is uninspiring. The President's agenda of deregulation, tax reform, and infrastructure that had fueled the last leg up of the dollar's multi-year rally is now doubted, and those dollar gains have been unwound," the currency strategists wrote in the note entitled, "Dollar Licks Wounds as News Stream Doesn't Improve."