Citi flags a strong bearish pattern on the USD Index (DXY) monthly chart and maintains a bullish bias on EUR/USD.
"CitiFX Technicals remind us of a Momentous Monthly Close On USD Index. The USD Index posted a Double top at trend highs after a low to high move of 8 years and 10 months- exactly as seen in the last USD cycle into 2001-2002. The minimum target on this break is now is the horizontal support and 200 month MA at 88.25- 86.75, potentially by December," Citi notes.
"We remain bullish EURUSD, but note that European equities have begun to underperform US equities, ECB commentary on FX could be coming up and we watch for the evidence of second virus waves. August 5 is the German Court deadline for more evidence on its QE ruling, but we think the Court is already satisfied," Citi adds.