
Sell the Seasonal October Election Year Bounce in the US Dollar: BofA
Bank of America recently advised investors to consider selling the US dollar during a potential rebound this October, citing historical seasonal trends and current technical indicators as the basis for their recommendation.
The bank notes that, although there might be a temporary increase in the dollar’s value, the overarching trend leans towards a bearish forecast for the currency. Analysts have identified a bearish triangle pattern in the US Dollar Index (DXY), suggesting potential declines to approximately 98.98 and possibly further into the mid-96 range.
While a brief “snapback” rally is anticipated, reminiscent of occurrences in December 2023, July 2023, and February 2023, this rally is expected to be corrective in nature. It may test previous support levels now functioning as resistance around the mid-102s.
Bank of America states, “Unless the daily chart forms a technical bottom, our preference is to sell any October seasonal bounce in DXY for Year-End 2024 downside.”
The analysis underscores that technical indicators and oscillators align with a bearish perspective on the dollar, indicating that any gains in October should be seen as a selling opportunity rather than a sign of lasting strength.
This recommendation is part of a broader view of the foreign exchange market, reflecting BofA’s technical expectations for various currencies. Additionally, the bank takes a cautious stance on gold, advising against purchases due to overextended positioning and momentum, while indicating potential upside for silver.
The euro maintains a positive outlook, whereas the pound is expected to encounter corrections despite an overall bullish trend. The USD/JPY and other currency pairs are also suggested to move in line with BofA’s bearish outlook for the dollar.