Investing.com — The dollar is riding a three-week winning streak and is on track for its biggest October gain in more than a decade, but analysts at BofA believe the bullish run is dissipating and the trend is starting to fade. collection.
“We think the USD rally is starting to lose steam and start to fade,” BofA analysts said in a note on Monday.
The , which measures the dollar against a trade-weighted basket of six major currencies, rose about 2.5% in October, putting it on track for its best monthly performance since September 2022, while the month’s greenabck rally on track for the highest October DXY return in more than a decade so far, BofA added.
The dollar was influenced by several bullish factors: higher US interest rates; safe haven flows amid geopolitical tensions; and a relatively resilient U.S. economy.
But these drivers are expected to run out of road sooner or later, slowing the run in the dollar.
“The USD has benefited from higher US yields, safe-haven flows and relative US economic outperformance. However, we believe these factors are losing momentum,” the analysts said.
However, under the current macroeconomic backdrop, not all dollar-related pairs are ready for a dip, BofA suggests, emphasizing that “choosing the right USD pair to fade is important as there are still some residual bullish USD signals present are.”
“For this week, we prefer to adopt a bearish view given our call for a non-consensus rate cut by the BoC,” the analysts added, estimating that USDCAD’s near-term fair value a 1.36 handle would be with the USDCAD bulls likely to “come under pressure in the scenario of a 25 basis point rate cut.”
The euro is likely to be one of the biggest beneficiaries of the dollar’s weakness, but also of the improving eurozone economy and the relatively aggressive stance of the ECB. The analysts predict that the common currency will appreciate against the dollar to $1.15 by the end of 2025.
