Investing.com – The foreign exchange market appears to be turning bearish relative to the US dollar, according to Bank of America Securities, suggesting that the EUR/USD pair is on the verge of an upward breakout.
Over the past week, option biases have moved widely for US dollar put options, as European-based investors unwind long US dollar positions from last month, the bank said in a note dated May 13.
At 10:20 EST (14:20 GMT), it was trading 0.2% higher at $1.0812, even after the US grew at a faster-than-expected 0.5% month-on-month basis in April, a sign of continuing pressures. Inflationary early in the year. Second Quarter.
The bank added that FX options positions are set for US weakness on Wednesday, amid broader expectations for a headline monthly rise of 0.4%, and an annual increase of 3.4%.
The headline index, which excludes volatile food and energy prices, is expected to rise 0.3% month-on-month in April, and 3.6% year-on-year.
“We expect a rise in the EURUSD that also clears the resistance of the 50-week and 100-day SMA around 1.0823-1.0828, if the US core CPI sees a decline this week,” the bank said, adding the core CPI since the beginning of year so far. Year-over-year data for the US has surprised above the consensus average for four straight months.
Even an embedded inflation print would alleviate some sticky inflationary concerns for investors.
As a result, “We are bullish on EUR/USD this week and see the pair breaking out of its year-to-date downtrend if the US core CPI fails for the first time in 2024.”
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