Bank of America Urges Investors to Sell US Dollar in October Bounce | Potential Declines Ahead
In a recent note, Bank of America advised investors to consider selling the US dollar during a potential bounce in October. The bank's analysts highlighted historical seasonal patterns and current technical indicators that suggest a bearish outlook for the currency.
The analysts pointed to a bearish triangle pattern in the Dollar Index (DXY), indicating possible declines to around 98.98 and potentially into the mid-96s. While they anticipate a temporary "snapback" rally, similar to previous occurrences in December 2023, July 2023, and February 2023, they view this rally as corrective and expect it to test former support levels now acting as resistance in the mid-102s.
According to BofA, unless the daily chart forms a technical bottom, the bias is to sell any October election year seasonal bounce in DXY for downside by the end of 2024. The note emphasizes that technical indicators and oscillators support a bearish stance on the dollar, suggesting that any gains in October should be seen as a selling opportunity rather than a sign of long-term strength.
This recommendation is part of BofA's broader view of the FX market, including their technical expectations for various currencies. The bank also advises caution on gold, citing stretched positioning and momentum, while suggesting potential upside in silver. The euro is expected to remain positive, while the pound may face corrections despite a bullish trend. Other currency pairs are also positioned for movements that align with BofA's bearish dollar outlook.
In conclusion, if you're considering trading in the foreign exchange market, it may be a good time to pay attention to the US dollar and other currencies mentioned in Bank of America's note. Keep an eye on technical indicators and seasonal patterns to make informed decisions about your investments. Remember, the key is to stay informed and be prepared for potential market movements that could impact your finances.