Analyst: Wedge pattern says brace for dollar's next big rally; Pain for commodities

The dollar is approaching its big rally says Forbes' analyst Jesse Colombo who has taken a deeper look at Raoul Pal's "wedge pattern".

Global Macro Investor founder Pal discussed a wedge pattern on the dollar that he’s watching closely for signals of that move. A wedge refers to a “common consolidation pattern that often leads to powerful moves upon a breakout or breakdown,” explains Colombo.

He notes that in order to be sure that wedge pattern is forming, the dollar will need to break out, as shown in the chart below:

It will have to bust past 100, a resistance level hit in March and April of 2015.

The analyst continues to explain that wedge patterns often drive a move of the same magnitude as the trend that led to that pattern.

If this happens, the dollar index could be about to add another 20 points, bringing it to 120 — the last dollar peak, seen in 2001 and 2002, and also a resistance level.

Both analysts - Colombo and Pal - have cautioned that a bullish breakout in the greenback means painful times for commodities.