BUZZ-COMMENT-Good time to anticipate resumption of USD rally

Feb 24 (Reuters) - Traders have slashed dollar longs in advance of the March 4 deadline for U.S. tariffs which leaves them far less prepared for the likely resumption of the rally that has resulted from the extremely negative implications of a trade dispute.

The drop for the dollar index - which has met the target for a minor correction of its prior rise a little over a week before deadline day - has become stretched towards the base of the 20-day Bollinger Bands.

Overbought when tariffs were announced on February 3, the dollar index has become oversold, heightening upside risk at this crucial time.

Since the delay was announced, traders have slashed bets on a rise, and are short the dollar against yen, Mexican peso and Brazilian real.

Bets against all nine currencies in a Reuters FX poll have been reduced significantly and none were considered to be large in the first place.

The U.S. interest rate looks set to remain above 4% for most of the next year following a further rise above the Federal Reserve's inflation target underpinning the dollar.

If the rally resumes, the dollar may gain between 3-5%, but could rise much more if a dispute leads to a trade war.

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