Synopsis:

BofA’s quant analysis suggests the USD downtrend has more room to run in Q2. Following a sharp 3.5% weekly DXY drop in early March—one of the steepest since 1999—historical patterns point to continued USD weakness, with a likely retest of the 100-handle lows seen in Q3 2024.

Key Points:

1️⃣ One of the Worst Weekly USD Selloffs Since 1999 📉

• DXY fell 3.5% from Feb 28 to Mar 7—only 5 larger weekly declines since EUR inception.

• These episodes historically precede further losses, with a 3-month average drawdown of -3.2%.

2️⃣ Trend Signals Support Further Weakness 📊

• Momentum and quant signals align with medium-term trend breakouts, reinforcing bearish DXY prospects.

• Suggests more than just a short-term correction.

3️⃣ Q2 DXY Trough Could Test 100 Level Again 💵

• Based on prior patterns, BofA expects the index to retest last year’s lows, implying broad-based USD softness ahead.

Conclusion:

BofA’s quant and technical analysis indicate that the recent USD selloff likely marks the beginning of a sustained trend lower, not a one-off event. If history is any guide, the DXY could revisit the 100 level in Q2, pointing to renewed strength in EUR, JPY, and other G10 FX.