BCA noted that the dollar's structural decline is likely delayed as long as US economic growth, portfolio investment inflows, and corporate earnings remain robust.
BCA Research lowered its tactical forecast for the US dollar on Friday, citing a prolonged rally driven by revised Federal Reserve policy expectations, rising long positions, lower oil prices, and less favorable seasonal factors that worsen the risk-reward profile of further bullish plays.
The company recommended exiting tactical long positions on the US dollar. BCA noted that the dollar's structural decline is likely delayed as long as US economic growth, portfolio investment inflows, and corporate earnings remain robust.
BCA noted that USD/JPY has returned to levels close to the intervention-sensitive zone. The company believes that further short positions on the yen are unattractive at current levels.
The research firm maintains a tactical hedge through a short position on USD/JPY in the event of possible intervention by the Japanese authorities. BCA pointed to the currency pair's proximity to intervention thresholds as a key risk factor.
The company confirmed that, despite short-term headwinds to dollar strength, US economic fundamentals continue to support the currency in the long term.