Analysts at Bank of America (BofA) provided information on foreign exchange market trends, noting a significant rise in the pair last week. The growth was driven by a weak report on the consumer price index (CPI) in the US. Signals from BofA indicate that the euro’s upward trend against the US dollar is likely to continue.
The bank’s analysis pointed to options flows that show robust demand for U.S. dollars, suggesting investors are betting on a weaker dollar. In addition, the BofA Technical Matrix revealed signals of a continued downward trend in the US dollar compared to major currencies such as the Euro (EUR), British Pound (GBP) and New Zealand Dollar (NZD).
Despite the positive trend for EURUSD, BofA warned that the momentum seen from the risk rally may not be as strong going forward. Analysts noted that the index (DXY), which measures the dollar’s strength against a basket of currencies, managed to close above the 200-day simple moving average (SMA), indicating a potential slowdown in the dollar’s decline.
In addition, BofA economists noted the absence of significant market-moving events in US economic data expected this week. Without new bearish catalysts for the US dollar, the currency’s downtrend may not continue at the same pace as seen last week.
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