Bank of America (BofA) reported a growing consensus against the US dollar, with significant selling last week. Investors in both the US and Europe have been net short on the dollar over the year. Demand for US dollar put options has been on the rise.
Bank of America highlighted a bullish outlook for the euro versus the New Zealand dollar ( ) this week, citing signs that the uptrend is continuing. This outlook is in line with a bearish stance for the New Zealand dollar following the Reserve Bank of New Zealand (RBNZ) decision to cut interest rates by 25 basis points on August 14, 2024, accompanied by dovish guidance.
The EUR/NZD pair is trading at 1.81, close to its lowest level since the beginning of the month. The Bank of America technical matrix indicates a continuation of the broad-based uptrend in the euro, while the Comprehensive Risk Analysis System (CARS) points to a downtrend in the NZD due to lower New Zealand yields.
In the options market, there was strong demand for euro call options, as implied volatility for the pair rose on the back of lower volatility overall.
However, Bank of America points to a potential risk to its bullish outlook for EUR/NZD: the release of the preliminary Eurozone PMI data for August this week. If the PMI data comes in weaker than expected, it could challenge the current view on the currency pair’s performance.
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