The dollar index is about to test a very strong intraday support level

• The dollar index is trading 0.18% lower on the session as risk-off sentiment cools.
• The price of the trade-weighted index is about to hit a pretty strong confluence level.

Dollar index 1-hour chart

The dollar index increased in value at the end of last week after the risk environment shifted to the negative side. There are some signs of a potential of a second coronavirus wave in China and the US still has not got control of the initial infection rate. 

Last time out the dollar strengthened significantly after a rush for cash ensued following the COVID 19 outbreak. Gold even took a drop as traders and investors needed capital to meet redemptions on all kinds of positions around the globe. This time around the safe-haven status of the US dollar might not be as strong but it would be prudent to hold the world's reserve currency in case the situation does get out of control again.

Looking at the chart, the price is about to move towards the level where the 55 Exponential Moving Average (EMA) and the 200 Simple Moving Average (SMA) meet. There is a good chance that the market could find some support there but it does not mean the overall down move is finished. This could be the level where the market stalls before deciding the underlying direction and potentially move back up.

The Relative Strength Index indicator has a trendline on the top of the waves and if this breaks it could mean the reversal might be kick-started again. However, if 96.40 is broken on the downside then the market could continue in its lower trajectory and the downtrend could continue. 

Although the MACD histogram is firmly in the red it is important that both the signal lines have not crossed over. If that happens then maybe it could be a confirmatory sign that the price is moving back down.

Additional levels