Dollar Index Rebounding From Round Bottom

The ICE Dollar Index remains at levels around a two-month high of 94.35.

The current stock-market turmoil, which started in early September, has triggered a reduction in investors' risk appetite. To protect profits on short positions on the U.S. dollar, investors keep unwinding such positions, which helps to add fuel to the Dollar Index's rally.

In fact, the Dollar Index marked a recent closing low at 92.16 on August 31, down 10.5% from a high at 102.94 on March 19. A technical rebound following a decline of such magnitude should not be a surprise in the forex market.

On a daily chart, the Dollar Index has confirmed a Round Bottom.

Sources: GAIN Capital, TradingView

In fact, it has shot above the Upper Bollinger Band, calling for acceleration to the upside. And the relative strength index - well directed in the 70s - also indicates continued upward momentum for the Index.

Riding on a further rally, the Index is expected to encounter resistance at 95.45 and 96.40.

However, a return to the Key Support at 92.70 would signal a bearish reversal.

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