Investing.com – Bank of America said in a note on Friday that investors should consider selling the U.S. dollar during a potential rebound in October, driven by historical seasonal patterns and current technical indicators.
According to BofA, while the broader trend points to an initial rise in the dollar, it also points to a bearish outlook for the currency.
The analysts point to a bearish triangle pattern in the (DXY), indicating a potential drop to around 98.98 and possibly into the mid-96s.
However, they expect a temporary ‘snapback’ rally, similar to previous events in December 2023, July 2023 and February 2023.
This rally, if it materializes, is expected to be corrective and challenge the previous support levels that act as resistance in the mid-102s.
“Unless the daily chart forms a technical low,” BofA notes, “our preference is to sell a seasonal upswing in the October election-year DXY against a downtrend in the YE24 year.”
The note highlights that technical indicators and oscillators support a bearish stance against the dollar, suggesting that any gains in October should be viewed as an opportunity to sell rather than a signal of long-term strength.
The recommendation is based on BofA’s broader view of the FX market, including their technical expectations for various currencies.
Additionally, BofA’s broader analysis includes a cautious stance on gold, advising against pursuing it due to tense positioning and momentum, while simultaneously suggesting potential upside for silver.
The outlook for the euro remains positive, while the pound is expected to face corrections despite a bullish trend. The and other currency pairs are also positioned for moves that align with BofA’s bearish dollar outlook.
