Investing.com - The U.S. dollar has shown some resilience of late, but Bank of America Securities sees these retracements as short-lived and prefers to fade any greenback rallies.
At 08:40 ET (12:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, climbed 0.2% to 99.012, gaining around 0.5% over the course of the last week.
However, the index still languishes near a three-year low, and is headed for its worst monthly fall since November 2022, down around 4.6%.
“As U.S. tariffs risk premium started to show easing signs last week, both the U.S. dollar and U.S. equity retraced some of the month-to-date losses,” said analysts at Bank of America Securities, in a note dated April 28. “Last week’s USD rally notably occurred in U.S. trading hours, after U.S. equity markets opened.”
Still, the bank expects the dollar weakness to resume after the April month-end, noting that structural dollar supply continued its course in Asia-trading hours last week.
Also, despite last week’s retracement, the dollar index has stayed below the 100.00 psychological resistance level.
The bank prefers to fade dollar rallies, and at current spot levels, likes to chase AUD/USD higher.
The pair has rebounded back to 0.64, but compared to other USD/G10 FX moves this month like in EUR/USD and USD/CAD, the AUD.USD uptrend has yet to become stretched.
In the very near-term, the combination of bullish AUD option flow and an upside first-quarter CPI surprise this week could push AUD/USD back above 0.64 with the chance to cross above the 200-day simple moving average at 0.6462.