The U.S. dollar is up across the board this morning, following-through with last week's rally. As expected, most foreign currencies are getting crushed by the weight of the stronger dollar. But think twice before buying the greenback with both hands.

The three day rally underway in the greenback is due, mostly, to the European Central Bank (ECB). Late last week, the ECB backed off of its hawkish stance. This change in rhetoric caused the euro to plummet, which was something that we were expecting. You can get the details at the link below:

ECB Outcome: EUR/USD Drops 150 Pips in 30 Minutes

My sense is that the euro is dragging down other currencies, but lifting the U.S. dollar. In other words, the rally in the dollar isn't inspired by a new bullish outlook on the U.S.

Indeed, last week's non-farm payrolls report pushed out expectations for a rate hike in the U.S. Here are the most recent quotes from the Fed Funds Futures market:

Fed Funds Futures

As you can see in the November, December, and January contracts, we're looking at maybe a 25 basis point hike by the end of the year.

Without a strong fundamental impetus (i.e. rising short-term interest rates), I think the dollar will continue to zig and zag. That's why I prefer buying the dollar on dips instead of chasing momentum. Quite simply, there's no momentum in the forex market right now.

Looking at the EUR/USD, although we've seen a big move in the last three days, we're still stuck in a trading range. Supply and demand are equalizing, as shown on the 100 pip box size point and figure chart. Until we get a breakout from this pattern, I like the strategy of buying the dollar near support and selling other currencies, like the euro, pound, franc, and yen, near resistance.

EUR/USD Daily Chart Support and Resistance with Point and Figure Chart