Bank of America (NYSE:BAC) (BofA) analysts provided insights into currency market trends, noting a significant rally in the EURUSD pair last week. The surge was attributed to a subdued US Consumer Price Index (CPI) report. BofA's signals indicate that the upward trend for the euro against the US dollar is likely to continue.
The bank's analysis pointed to option flows that show a sustained demand for USD puts, suggesting that investors are betting on a weaker dollar. Additionally, BofA's technical matrix revealed signals of a continuing downtrend for the USD when compared to major currencies such as the euro (EUR), the British pound (GBP), and the New Zealand dollar (NZD).
Despite the positive trend for the EURUSD, BofA cautioned that the momentum seen in the risk rally might not be as strong moving forward. The analysts observed that the US Dollar Index (DXY), which measures the dollar's strength against a basket of currencies, managed to close above its 200-day Simple Moving Average (SMA), an indication of a potential slowing in the dollar's decline.
Furthermore, BofA's economists have noted an absence of significant market-moving events from US economic data expected this week. Without new bearish catalysts for the USD, the currency's downtrend might not maintain the same pace as observed last week.
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