Synopsis:

Bank of America highlights that recent EUR/USD strength has been fueled primarily by Real Money investors based in Europe, signaling a potential regime shift in USD positioning. Meanwhile, USD selling remains limited among US-based investors, suggesting more room for broad-based Dollar weakness.

Key Points:

• European-Driven USD Selling:
  EUR/USD demand in Q2 was dominated by European Real Money investors, pointing to persistent non-US buying pressure.

• Underweight USD Positioning in the US and Asia:
  Real Money and Hedge Funds in the Americas (AMRS) and Asia show limited USD selling, implying additional room for repositioning lower in USD, especially against EUR.

• Regional FX Themes:

  • CAD: Bought in AMRS

  • EM FX: Bought in Europe

  • JPY: Bought in Asia

  • GBP: Sold in both AMRS and Europe

  • SEK: Sold in both AMRS and Asia

Conclusion:

BofA sees the geographic skew in USD selling—especially heavy European participation and light AMRS engagement—as evidence of a partial regime shift in global FX flows. With significant USD exposure still held by US and Asian investors, further Dollar downside remains likely, particularly versus EUR.