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U.S. Dollar Rally Could Keep Going

This article was originally published on ETFTrends.com.

The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) is up nearly 2% over the past week and resides above its 200-day moving average. While the greenback's recent strength has sparked some concerns, some technical analysts see more upside ahead for the U.S. currency.

UUP tracks movements against a basket of currencies including euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. UUP tracks the Deutsche Bank Long USD Currency Portfolio Index – Excess Return Index.

“The dollar broke and closed above its 200-day moving average Tuesday, setting it up for a further advance. According to Bespoke, the dollar on average has continued to make gains in the one month and three month periods after it closes above the 200-day, if it has been trading below that level for an extended time,” reports CNBC.

Fed Leaves Interest Rates Unchanged

The Federal Reserve concluded its recent meeting Wednesday, leaving interest rates unchanged. However, that does not change the course for more rate hikes later this year. The Fed raised rates in March after doing so three times last year.

The greenback has appreciated against global currencies since January on rising expectations that the Federal Reserve will continue its gradual rate hike. However, Nomura argued that the U.S. rate advantage will soon sour.

“The dollar is up more than 3.5 percent in just two weeks. It broke above the 200-day moving average Tuesday at 91.98 and closed above it for the first time in nearly a year,” according to CNBC.

Rising inflation in the U.S. could be a catalyst for additional rate hikes, which could spark the dollar higher. However, some market observers believe other global central banks are out of ammunition for easy monetary policy, meaning dollar rivals, such as the euro and yen, could be due for some upside as well.

Traders considering a bearish position on the dollar can consider the PowerShares DB US Dollar Index Bearish (UDN) , an inverse though not leveraged bet against the greenback.

For more information on the USD, visit our U.S. dollar category.

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