Bank of America has warned that the dollar index is about to form a bullish "golden cross"

Sept. 22 - The dollar's recent rally has put it on track to form a gold cross, a technical trading chart pattern that is short-term bullish on currencies, according to a Bank of America Global Research report released Wednesday.

According to a Bank of America Global Research report released on Wednesday, the dollar's recent rally has put it on track to form a gold cross, a technical trading chart pattern that is bullish on the currency in the short term.

A golden cross is when a short-term moving average crosses a long-term moving average.

According to LSEG, the 200-day moving average of the dollar index, which measures the dollar's currency value against six rivals, is close to being surpassed by the 50-day moving average of 103.001, at 103.036.

"This supports our view that the dollar will be supported and potentially stronger in the fourth quarter of 2023," said Paul Ciana, technology strategist at Bank of America Global Research, in a note released ahead of the much-anticipated Federal Reserve interest rate decision on Wednesday. The dollar index was down 0.47 percent at 104.707 Eastern Time ahead of the decision.

Last week, the dollar index rose for a ninth consecutive week, marking its longest rally in nearly a decade, as a resilient U.S. economy and weaker growth abroad helped the dollar rally.

According to a Reuters analysis, the last time the U.S. dollar index formed a gold cross, it rose another 24% before peaking.

Mr. Siana, however, pointed out that the index's recent strong rally posed a risk to bullish signals. Such a move now would lift the dollar index above 129, well above its 2022 high of 114.78. "Signalling when prices are near highs can be more difficult to execute than signaling after a timely correction," he said.