In a nutshell, Bank of America analysts called on their clients to be dollar bullish, reiterating their positive forecasts for dollar-yen pair, dollar-euro pair and U.S. Treasuries.
But
in their outlook for the euro-dollar pair, they went a step further and said the shared currency’s recent gains were nearing a top, advising investors to sell the euro on bounces.
Like the dollar, Treasuries have so far defied almost unanimous forecasts that yields would rise in 2015, as negative rates in Europe forced foreign investors to keep their money in Treasuries. Treasury yields move inversely to prices.
Meanwhile, for about four months, the dollar-yen hasn’t moved outside a range of between 118.4 and 122.
As analysts consider, earlier Tuesday, the euro broke through a key support level when it fell below $1.1131, its low from May 11. They now expect
the shared currency to meet with resistance around $1.0535, before
falling to $1.0462, its March 16 low. After that, it is on to their long-term
target of $1.0283.
Speaking about the dollar-yen pair, analysts say that "the contracting range of the past 4+ months is bringing to a
conclusion and the long-term uptrend is set to resume for 124.59, ahead
of 128.45. Below 118.33 invalidates this view and points to continued
range-trading. Those awaiting additional price confirmation should watch
for a break 120.86 (Apr-13 high)." Analysts recommend adding to long positions
on a break 120.86.
As for Treasuries, the Bank remains bullish, despite Tuesday morning’s rise in 10yr (and 30yr) Treasury yields. "Looking specifically at 10s, not only did the yield fail to break the 18m trendline support (now 2.294%) but the market is forming a potential month-to-date Head and Shoulders Top. Below the neckline at 2.144% completes the pattern, targeting year-to-date channel base at 1.919% and potentially below."
Keep a little faith for longer, this is the message Bank of America wanted to bring.
