Risk assets are staging a comeback after yesterday’s big drop (perhaps on signs that the more extreme wing of Trump’s trade advisors is taking a backseat in the upcoming China talks), but the greenback is hardly giving back any of its gains.

As the chart below shows, the US dollar index rocketed higher from the bottom of its two-month bullish channel yesterday. In the process, prices formed a large “bullish engulfing” candle signaling a big shift back in favor of the bulls after Monday’s weakness. The combination of bullish price action and a logical support area (not to mention the surprising resilience today) suggests that the dollar may extend its rally in the days to come.

Source: TradingView, FOREX.com

From a fundamental perspective, monetary policy will be the key factor to watch. The market-implied odds of a Fed rate hike in December, long thought to be a “done deal,” ticked down to just 72% yesterday, according to the CME’s FedWatch tool. While today’s initial jobless claims and durable goods reports both came in on the soft side, we still believe that the central bank will feel comfortable raising rates again next month.

The bigger question surrounds the outlook for monetary policy moving into 2019. With major thought leaders from Jim Cramer to the Wall Street Journal Editorial Board to an increasing number of Fed policymakers to (of course) Donald Trump all calling for the central bank to tap the brakes, the clockwork once-a-quarter pattern of interest rate increases that we’ve grown accustomed to over the last year or two will likely come to an end in 2019.

When it comes to the US dollar, how the Fed approaches this conundrum will be the last, most important storyline to watch through the rest of the year.