Investing.com – According to Bank of America Securities, the currency market appears to be turning bearish against the US dollar, indicating that the EUR/USD pair is on the verge of a bullish breakout.
Over the past week, option skews for USD puts have largely shifted, the bank said in a May 13 note, with Europe-based investors completely unwinding their USD long positions over the past month.
At 10:20 ET (14:20 GMT), it was trading 0.2% higher at $1.0812, even after the US grew by a faster-than-expected 0.5% month-on-month in April, in a sign of continued inflationary pressures at the beginning of the year. the second quarter.
Currency options positioning is poised for U.S. weakness Wednesday, the bank added, amid broader expectations of a 0.4% monthly gain and 3.4% annual gain.
The key, which excludes volatile food and energy prices, is expected to rise 0.3% from April, and 3.6% year-on-year.
“We expect a EURUSD rally that also clears the next 50-week and 100-day SMA resistances around 1.0823-1.0828 should the US core CPI see a miss this week,” the bank said, adding the core CPI for the year to date. On an annual basis, US interest rates have been above the consensus median for four months in a row.
Even an in-line inflation print should alleviate some lingering inflation concerns for investors.
As a result, “we are bullish on the EUR/USD this week and see the pair exiting its year-to-date downtrend should the US core CPI miss out for the first time in 2024.”
Remove ads
.
