The FX market – worth a gargantuan $7.5 trillion per day – is where the real signals are sent across the global economy.

Right now, one signal is deafening: The US Dollar has coiled like a spring and is poised to release. Here's what that really means in terms of currency values.

The Dollar Index and an Inflection Zone

For the last 11 months, The US Dollar Index (DXY) has gyrated within a somewhat constrained 5-percent range-a period of significant consolidation for this often volatile measure. When consolidation that has compressed volatility comes off the rails – and we haven't seen volatility this low in about four years – a much larger subsequent move nearly always occurs . Because volatility tends to mean-revert and often bounces in tandem with such compression it should act just like a coiled-spring: sharp, decisive, and prolonged.

Technical Insights

While the DXY has recently surrendered some of its strength, its overall long-term bullish pattern is still intact; it is still respecting the year-long bullish structure and is riding above a line of support with a defined trend.

The Dollar is currently bumping against an inflection zone between 99.30 and 100.30

Bull: Hold 99.30–100.30 support on way to a new higher on break above 102. Higher still, to above 103, would lend credence to a durable bottom for the Dollar Index.

Bear: Break below 99.30, then break down below major support near 96 would send many dollar bulls home, forcing them to reconsider support within the current uptrend at levels nearer to 93.75–94.10.

Key Events to Watch: Next week’s raft of ISM’s, and especially jobs-related surveys will tell a great story for further dollar strength (or lack thereof).

The Yen and Options on the Precipice

USD/JPY touched the 164 level last week prior to pulling back sharply (nearly 500 points), pulled back primarily due to end-of-month repositioning by traders, fresh intervention rhetoric (or action), and some minor profit-taking. Yet, structure still dictates we're on course for the highs of the year until we lose the range of support below 157.50–158. The Yen's discount now seems the deepest on record-even while US yield differentials to Japan continue widening to extremes.

Schroders predicts a Y167.8 target for USD/JPY by year’s end .

The Bank of Japan has shown few signs they will abandon their gradually-rising trajectory. Although one BOJ board member voted for a hike this month, an initial interpretation by markets of the BOJ decision was that policy was interpreted as broadly accommodative and as such the Yen depreciated. The Board continued to note that it expected "underlying consumer inflation to gradually increase towards 2 percent as its effects become clearer," while adding it still forecast "high levels of uncertainty" including regarding international economic and trade activity and financial market developments.

Bull: Take out the 160.60 high and test resistance near 164 and eventually 167.

Bear: Breakdown of 157 support and decline to 155.

Key Level: With little hope on the intervention front (beyond the jaw boning or possibly the "YCC tweak") unless levels go through 160.73 with velocity we would expect new highs.

The Euro's Weak Underbelly

The Euro is on shaky ground-J.P. Morgan has thrown in the towel and is now bearish EUR/USD for the first time in a year. The main impetus behind their change of heart? The US has a rapidly widening growth advantage relative to the EU, the most hawkish repricing of the Fed we've seen this year has tilted the all-important rate-differential in dollar's favor over the Euro, and more recently, with a war now in Iran the EU'sterms of trade have sharply deteriorated and EU equity market share has collapsed relative to US Equities.

Bull: Hold 1.10 and on signs of further Fed dovishness or Middle Eastern de-escalation then we will go to retest near 1.15 area of support. (I have J.P. Morgan and BNP Paribsa bearish tone as you can see above.)

Bear: Breakdown below 1.07 on fears of an energy shock as the conflict in Iran unfolds and as long as growth differentials remain against the Eurozone with the EU.

Growth Divergence Drives Bear Case for Euro For first time in a year, J.P. Morgan moves to the downside on EUR/USD forecasts amid surging growth divergences and a widening real yield differential – forecast EUR/USD at the 1.13-1.15 range on our forecasts over next three quarters; at BNP Paribas a 12month forecast of 1.20 for EUR/USD

Structural Forces at Play-Beyond Fed and ECB

De-dollarisationis an increasingly meaningful theme in this system -- as is polarization. The foreign exchanges market is moving into a structural polarization period -with Iran/Venezuela being the only targeted areas to put the petro-dollar in place while China and the E U work to internationalize their currencies. The most important thing one should watch here is the activity in the stablecoin space.

At more than 70% of stablecoin conversions and still accelerating, we're already witnessing dollar's dominance in digital markets beginning to bleed over into FX volumes.

More money is chasing forex as it should... 80% or almost 500% as we found on Thursday for dollar over a currency exchange the Bank of Japan that is more likely just "going through themotions" now, as for years now we have witnessed Japan only and ever be a place to keep dollar safe from other less attractive currencies...as well as currency devaluation efforts to offset a rapidly aging population which will never get back the money it wants, nor create new jobs sufficient to provide a growing future for a declining generation of Japanese youth. The forex market will continue growing; The forex market is projected to grow from $838 billion in 2025 to $893 billion in 2026 at a compound annual growth rate of 6.6%. Growth in the forex market is driven by the increasing demand for online currency trading, the expansion of cross-border business transactions and growth of blockchain technology for currency trading. What This Means For Your Wallet The forex market is speaking.

These are clear signals.

The dollar is primed. Based on technical setups, institutional views, and structural shifts, this could very easily be the setup for something bigger. For those trading in currency: Important levels are in plain sight DXY support/resistance 99.30 /102.00USD/JPY support/resistance 157.50 / 164.00EURUSD support/resistance 1.07 / 1.15 For those investing in assets: USD strength will likely dictate all major asset correlations going forward.

If these support levels hold for dollar and eventually begin moving higher the case is for relative outperformance of US assets vs global as in the past. Stay patient… stay disciplined… keep your eye on these levels… and do not ignore the coiled spring you should feel in markets as I do. - Brad

What's your take on the dollar's next move? Drop a comment below.