Bank of America Global Research discusses the USD outlook and flags a risk of further weakness over the coming weeks from a death cross in the USD Index 'DXY'.
"A couple of weeks ago we suggested the Fed may shift from a preemptive to more reactive stance, potentially limiting further decline in US real rates. But we were proven wrong with real rates approaching 2012-13 lows across the curve. While the Fed has implied that yield curve control may not be as imminent as the consensus expects, the overall communication has remained very dovish with the Fed committing to no further tapering of its asset purchases (and open to expanding if needed) as well as looking to reinforce its forward guidance," BofA notes.
"The USD has been relatively stable in the face of the latest collapse in real rates but our technical strategist flags confirmation of a death cross in the DXY (50d average below the 200d average), which is typically associated with a weaker dollar in subsequent weeks," BofA adds.