Bank of America Merrill Lynch is bullish the US dollar and long the greenback against both the AUD and NZD (target of 0.8525 in AUD/USD and 0.7627 in NZD/USD).
“While, the USD weakness over the past two days was not expected, a medium and long term look at the USD index says stay the course,” BofA says.
“Upside targets are seen to 89.62/91.48 while the old 2012/2013 highs at 84.10/84.75 should now limit pullbacks,” BofA projects for the Dollar Index (spot at 85.36).
Meanwhile, BofA is bearish on gold and looking to sell any bounce over the coming days.
“The reversal from 1241/1252 area resistance says the month-to-date corrective rally is finished and the larger bear trend has resumed. While the not-yet-complete, intra-day impulsive decline from 1255 says it may be several days before we see a gold bounce, bears should stay patient before acting,” BofA says.
“A corrective rally could prove substantial and could extend to, but not exceed, the Oct-21 high of 1255.37 before resuming lower. Once complete, downside targets are seen to the Jun’13 low of 1180 and potentially below to 1087 and even 956,” BofA projects.
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Update: BAML was stopped out of its short recommendation at 0.7944, which I believe was keyed off the 61.8% retracement of the Oct 20-23 fall. The trade lost 92 pips so they’re not exactly playing with the hot hand.
