Bank of America (BofA) analysts are suggesting that traders consider selling USD rallies, particularly against the Canadian Dollar (CAD), Japanese Yen (JPY), Israeli Shekel (ILS), and Indian Rupee (INR). The team identifies specific technical indicators that suggest a USD correction could be imminent.
Key Points:
- General Outlook: BofA analysts suggest that Tuesday’s USD high point may serve as resistance and an ideal point to sell USD rallies, especially when considering four currency pairs.
1. USD/CAD
Overbought Conditions: Indicators point to an overbought state for the pair.
Resistance in the 1.36s: The USD/CAD pair is turning down from resistance levels around 1.36.
Oil Prices: A stabilizing oil market and golden cross formation indicate the spot rate could mean revert into the 1.33s.
2. USD/JPY
Bearish Reversal: USDJPY experienced a bearish reversal day at resistance.
RSI and MACD Divergences: Both the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) are showing bearish divergences.
Correction Incoming: The pair could test the daily Ichimoku cloud in the 142s.
3. USD/ILS
Resistance at Channel Top: The USD/ILS pair is testing resistance at the top of its channel.
Mean Reversion: A mean reversion to the 3.70/3.68 range appears possible alongside a USD selloff.
4. USD/INR
Back to Mid-Range: The pair has already reverted to its mid-range.
Lower Range Possibility: A broad USD correction could push it back to the lower end of the range at 82.00-81.80.
Implications:
For Traders:
Sell Opportunities: The aforementioned currency pairs offer potential opportunities for selling the USD on rallies.
Risk Management: Traders should use Tuesday’s USD high point as a reference for resistance, and incorporate risk management strategies when taking positions.
Conclusion:
Based on multiple technical indicators, BofA analysts recommend selling USD rallies against CAD, JPY, ILS, and INR. Each of these pairs presents specific conditions and signals that a USD correction could be in the offing.
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